Abstract
When asked why the level of intra-regional trade in West Africa is low despite regional integration efforts, the literature highlights the poorly diversified structure of economies, the non-application of community arrangements, the inconsistency or mismanagement of trade policies, supply constraints, and inadequate transport infrastructure. Without calling into question the relevance of these factors, this paper investigates the contribution of institutional variables to the explanation of trade flows in West Africa over the period from 1996 to 2018. Using a gravity model, the study shows that institutional quality matters. The quality of institutions in the Economic Community of West African States (ECOWAS) countries influences bilateral trade. Political stability is an essential component of the quality of the institutions that determine trade in the ECOWAS zone. These results suggest that more than trade liberalization is needed to deepen trade integration and that institutional reforms and harmonization in West Africa are required.
Article PDF
Avoid common mistakes on your manuscript.
References
Anderson J.E., 1979. A theoretical foundation for the gravity equation, Am. Econ. Rev. 69, 106–116.
Anderson J.E., van Wincoop E., 2003. Gravity with gravitas: a solution to the border puzzle, Am. Econ. Rev. 93, 170–192.
Anderson J.E., van Wincoop E., 2004. Trade costs, J. Econ. Lit. 42, 691–751.
Anderson J.E., van Wincoop E., 2001. Gravity with gravitas: a solution to the border puzzle, National Bureau for Economic Research, Working Paper, 8079, Cambridge, MA.
Anderson J.E., Marcouiller D., 2002. Insecurity and the pattern of trade: an empirical investigation, Rev. Econ. Stat. 84, 342–352.
Anderson J.E., Young L., 2006. Trade and Contract Enforcement, The B.E. Journal of Economic Analysis and Policy, De Gruyter, 5, 1–36.
Afesorgbor S.K., 2012. Revisiting the effectiveness of African economic integration: a meta-analysis review and comparative estimation methods, African Economic Conference CEA 2013, Conference Paper, Regional Integration in Africa.
Agbodji A.E., 2007. Intégration et échanges commerciaux intra sous-régionaux: Le Cas de l’UEMOA, Rev. Afr. l’intégr. 1, 161–188.
Ajayi K., 2005. Regional financial and economic integration in West Africa, Undergraduate Thesis, Stanford University, Stanford, CA.
Anyanwu J.C., 2003. Estimating the macroeconomic effects of monetary unions: the case of trade and output, Afr. Dev. Rev. 15, 126–145.
Arellano M., Bond S.R., 1991. Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations, Rev. Econ. Stud. 58, 277–297.
Avom D., Gbetnkom D., 2005. Intégration par le marché: le cas de l’UEMOA, Région Dév. 22, 86–103.
Baier S.L., Bergstrand J.H., 2007. Do free trade agreements actually increase members’ international trade? J. Int. Econ. 71, 72–95.
Baldwin R., 2005. The Euro’s Trade Effects, Presented at the June 2005 European Central Bank Conference, Graduate Institute of International Studies, Geneva.
Bangake C., Eggoh J., 2009. The impact of currency unions on trade: lessons from CFA franc zone and implications for proposed African monetary unions, Saving Dev. 33, 61–72.
Bardhan P., 1997. Corruption and development: a review of issues, J. Econ. Lit. 35, 1320–1346.
Berden K., Bergstrand J.H., van Etten E., 2013. Governance and globalisation, World Econ. 37, 353–386.
Bergstrand J.H., 1985. The gravity equation in international trade: some microeconomic foundations and empirical evidence, Rev. Econ. Stat. 67, 474–481.
Bergstrand J.H., 1989. The generalized gravity equation, monopolistic competition, and factor-proportions theory in international trade, Rev. Econ. Stat. 71, 143–153.
Berkowitz D., Moenius J., Pistor K., 2006. Trade, law and product complexity, Rev. Econ. Stat. 88, 363–373.
Camara I., 2013. Impact des unions monétaires sur les échanges: le cas de l’UEMOA, African Economic Conference CEA 2013, Conference Paper, Regional Integration in Africa.
Carrère C., 2004. African regional agreements: impact on trade with or without currency unions, J. Afr. Econ. 13, 199–239.
Coulibaly A.D., Traore M., Diarra S., 2015. UEMOA versus CEDEAO: analyse par le modèle de gravité des flux de commerce intra-communautaire, Commission de l’UEMOA, Document de réflexion, DR 2015.1.
De Sousa J., Disdier A.C., 2006. La qualité du cadre juridique constitue-t-elle une barrière au commerce? Application aux économies en transition, Rev. Écon. 57, 135–151.
Deardorff A., 1998. Determinants of bilateral trade: does gravity work in a neoclassical world? in: Frankel J.A., (Ed.), The Regionalization of the World Economy, University of Chicago Press, Chicago.
Diop C.A., 2007. L’UEMOA et la perspective d’une zone monétaire unique de la CEDEAO: les enseignements d’un modèle de gravité, BCEAO, Document d’Etude et de Recherche, No DER/07/01.
Doukouré C.F., 2011. Qualité des institutions et commerce international: évidence à partir des exportations de l’UEMOA, MPRA Paper, No. 33333, University Library of Munich, Germany.
Elbadawi I., 2002. Real exchange rate policy and non-traditional exports in developing countries, in: Helleiner G.K. (Ed.), Non-Traditional Export Promotion in Africa: Experiences and Issues, Palgrave, New York.
Evenett S.J., Keller W., 2002. On theories explaining the success of the gravity equation, J. Polit. Econ. 110, 281–316.
Evlo K., 2009. Intégration régionale et commerce intra-communautaire en Afrique, Ann. l’Univ. Lomé 3, 75–105.
Farzanegan M.R., 2009. Illegal trade in the Iranian economy: evidence from structural equation model, Eur. J. Polit. Econ. 25, 489–507.
Feenstra R.C., 2004. Advanced International Trade: Theory and Evidence, Princeton University Press, Princeton.
Fidrmuc J., 2009. Gravity models in integrated panels, Empir. Econ. 37, 435–446.
Gammadigbe V., 2017. Intégration régionale et commerce agricole bilateral en Afrique de l’Ouest, Afr. Dev. Rev. 29, 147–162.
Harrison A., Tang H., 2005. Liberalization of Trade: Why so much Controversy? in: Roberto, Zagha N. (Ed.), Economic Growth in the 1990s: Learning from a Decade of Reform, World Bank, Washington, D.C., pp. 133–155.
Head K., 2003. Gravity for beginners, University of British Columbia, Mimeo.
Head K., Mayer T., 2014. Gravity equations: workhorse, toolkit, and cookbook, in: Gopinath G., Helpman E., Rogoff K. (Eds.), Handbook of International Economics, vol. 4, Elsevier-North Holland, Amsterdam, the Netherlands, pp. 131–195.
Helpman E., 1987. Imperfect competition and international trade: evidence from fourteen industrial countries, J. Japan. Int. Econ. 1, 62–81.
Hummels D., Levinsohn J., 1995. Monopolistic competition and international trade: reconsidering the evidence, Quart. J. Econ. 110, 799–836.
Huntington S.P., 1968. Political Order in Changing Societies, Yale University Press, New Haven.
International Financial Statistics (IFS), International Monetary Fund, 2019, UK Data Service.
Kaufmann D., Wei S.J., 1999. Does “Grease Money” Speed Up the Wheels of Commerce? The National Bureau of Economic Research Working Paper, No. 7093, Cambridge, MA.
Kaufmann D., Kraay A., Mastruzzi M., 2010. The Worldwide Governance Indicators: Methodology and Analytical Issues, World Bank Policy Research Working Paper No. 5430. Available from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1682130.
Lavallée E., 2006. Similarité institutionnelle, qualité des institutions et commerce international, Econ. Int. 2006/4, 27–58.
Leff N.H., 1964. Economic development though bureaucratic corruption, Am. Behav. Sci. 8, 8–14.
Levchenko A.A., 2004. Institutional Quality and International Trade, IMF Working Paper No. 04/231.
Limão N., Venables A.J., 2001. Infrastructure, geographical disadvantage, and transport costs, and trade, World Bank Econ. Rev. 15, 451–479.
Maddala G.S., Wu S., 1999. A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test, Oxford Bulletin of Econ. Stat. 61, 631–652.
Martínez‐Zarzoso I., Márquez‐Ramos L., 2018. Exports and governance: is the Middle East and North Africa region different? World Econ. 42, 143–174.
Mauro P., 1995. Corruption and growth, Quart. J. Econ. 110, 681–712.
Mauro P., 1998. Corruption and the composition of government expenditures, J. Public Econ. 69, 263–279.
Méndez F., Sepúlveda F., 2006. Corruption, growth and political regimes: cross country evidence, Eur. J. Polit. Econ. 22, 82–98.
Méon P.G., Sekkat K., 2004. Does the quality of institutions limit the MENA’s integration in the world economy? World Econ. 27, 1475–1498.
Méon P.G., Weill L., 2010. Is corruption an efficient grease? World Dev. 38, 244–259.
Mironov M., 2005. Bad Corruption, Good Corruption and Growth, University of Chicago, Miméo.
Myrdal G., 1968. Corruption: its causes and effects. In Asian Drama: An Inquiry into the Poverty of Nations, vol. II, Pantheon, New York [Reprinted in: Heidenheimer, A.J., Johnston, M., Le Vine, V.T. (Eds.), Political Corruption: A Handbook, Transaction Publishers, New Brunswick, 1989, pp. 953–961].
Ndong B., Mboup S.D., 2013. Accords commerciaux et flux de commerce dans la CEDEAO: le partage d’une monnaie unique est-il déterminant? African Economic Conference CEA 2013, Conference Paper, Regional Integration in Africa.
North D.C., 1990. Institutions, Institutional Change and Economic Performance, Cambridge University Press, UK.
Nunn N., 2007. Relationship-specificity, incomplete contracts, and the pattern of trade, Quart. J. Econ. 122, 569–600.
Oguledo I.V., MacPhee C.R., 1994. Gravity models: a reformulation and an application to discriminatory trade arrangements, Appl. Econ. 26, 107–120.
Rodrik D., 1995. Getting interventions right: how South Korea and Taiwan grew rich, Econ. Policy 10, 53–107.
Shleifer A., Vishny R.W., 1993. Corruption, Quart. J. Econ. 108, 599–617.
Rose A.K., Lockwood B., Quah D., 2000. One money, one market: the effect of common currencies on trade, Econ. Policy 15, 7–45.
Santos Silva J.M.C., Tenreyro S., 2006. The log of gravity, Rev. Econ. Stat. 88, 641–658.
Tinbergen J., 1962. Shaping the world economy: suggestions for an international economic policy, Econ. J. 76, 92–95.
Worldwide Governance Indicators (WGI) World Bank (2019). Available from: http://info.worldbank.org/governance/wgi/index.aspx#doc.
World Trade Organization (WTO), 2012. A Practical Guide to Trade Policy Analysis, WTO Publications, New York.
Author information
Authors and Affiliations
Corresponding author
Additional information
Peer review under responsibility of the African Export-Import Bank
Data availability statement: The data that support the findings of this study are available from the author upon reasonable request.
Rights and permissions
This is an open access article distributed under the CC BY-NC 4.0 license (http://creativecommons.org/licenses/by-nc/4.0/).
About this article
Cite this article
Gammadigbe, V. Trade Integration in West Africa: Does the Quality of Institutions Matter?. J Afr Trade 8, 65–81 (2021). https://doi.org/10.2991/jat.k.211201.001
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.2991/jat.k.211201.001