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Trade openness-industrialization nexus revisited in Africa

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Abstract

The objective of this paper is to revisit the nature of the link between trade openness and industrialization in Africa over the period 1990–2019. Given the fragility of the traditional openness indicator, we use the new index proposed by Squalli and Wilson (2011). This index has the advantage of taking into account the country's weight in world trade, making it a better measure of trade openness. The methodology used is that of dynamic panels with the application of the GMM system estimator. We arrive at the results according to which: (i) trade openness, as measured by the Squalli and Wilson (2011) indicator, is a positive factor explaining the level of industrialization in Africa; (ii) the relationship between industrialization and the level of wealth is nonlinear. Beyond the role that factors such as investment, the level of education, natural resources, ICT and governance can play, the results we have reached recommend that trade openness should be prioritised as a fundamental determinant of industrialization to remain one of the keys to Africa's economic development. This result remains consistent after several robustness tests.

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Notes

  1. For more details, see Squalli and Wilson (2011).

  2. Algeria, Angola, Benin, Botswana, Burkina Faso, Burundi, Cabo Verde, Cameroon, Central African Republic, Chad, Comoros, Congo, Dem. Rep., Congo, Rep., Cote d'Ivoire, Djibouti, Egypt, Arab Rep., Equatorial Guinea, Eritrea, Eswatini, Ethiopia, Gabon, The Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Lesotho, Liberia, Libya, Madagascar, Malawi, Mali, Mauritania, Mauritius, Morocco, Mozambique, Namibia, Niger, Nigeria, Rwanda, Sao Tome and Principe, Senegal, Seychelles, Sierra Leone, Somalia, South Africa, Sudan, Tanzania, Togo, Tunisia, Uganda, Zambia, Zimbabwe.

  3. The generated variable is REG = {1,5}.

  4. The test of Breusch-Pagan (1979) and Cook-Weisberg (1983) reveals that \(chi2(1)=11.01\) at 1%, attesting the presence of heteroskedasticity because it rejects the null which postulates constant variances.

  5. H1: Lighting Africa and supplying it with energy; H2: Feeding Africa; H3: Industrializing Africa; H4: Integrating Africa; H5: Improving the quality of life of people in Africa.

  6. Goal 4: Transformed economies and job creation; Goal 10: World-class infrastructure across the continent.

  7. Building a resilient infrastructure, promoting sustainable industrialization for the benefit of all, and encouraging innovation.

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  1. Faculty of Economics, University of Yaounde II, PO Box 1365, Yaoundé, Cameroon

    Dieudonné Mignamissi & Bernard Nguekeng

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Mignamissi, D., Nguekeng, B. Trade openness-industrialization nexus revisited in Africa. Econ Change Restruct 55, 2547–2575 (2022). https://doi.org/10.1007/s10644-022-09401-8

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