Trade openness, institutions and economic growth in Sub-Saharan Africa
DOI:
https://doi.org/10.22437/ppd.v8i6.10653Keywords:
Corruption, Economic growth, Government stability, Trade, InstitutionsAbstract
This research investigates the interactive effect of trade openness and the institutional quality on economic growth in sub-Sahara Africa. The sample consists of 38 sub-Saharan African countries and covers the period 1986-2015. Pooled OLS, fixed effect, and Dynamic GMM were used as estimation techniques. The empirical section used a nonlinear growth regression specification that interacts trade openness with law and order, bureaucratic quality, corruption, government stability, and democratic accountability. The study found that corruption, government stability, law and order, and bureaucratic quality as institutional quality variables harm economic growth. The interaction of trade openness and institutional quality variables positively impacted economic growth. It is an indication that trade openness better impacted economic growth in the presence of high-quality institutional variables.
Downloads
References
Acemoglu, D., Johnson, S. & Robinson, J.A. (2001). The Colonial Origins of Comparative Development: An Empirical Investigation. The American Economic Review, 91(5), 1369-1401.
Acemoglu, D., Johnson, S. & Robinson, J.A. (2002). Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution’. Quarterly Journal of Economics, 117(4), 1231-1294.
Acemoglu, D., & Johnson, S. (2005). Unbundling Institutions. Journal of Political Economy, 113(5), 949-995.
Ades. A., & Glaeser, E. (1999). Evidence on growth, increasing returns, and the extent of the market. Quarterly Journal of Economics, 114(3), 1025–1046.
Addison, T. & Baliamoune-Lutz, M. (2006). Economic Reform When Institutional Quality is Weak: The Case of the Maghreb, Journal of Policy Modeling, 28(9), 1029-1043.
Ahmed Md M (2012). Openness, Institutions, and Economic Growth: Empirical Evidence from Panel Estimation. [Master’s thesis]. NCSU Libraries, Raleigh.
Akinlo, T. (2016). Institution and Economic Growth in Sub-Saharan Africa (1986–2013). Emerging Economy Studies, 2(2), 1–11.
Alcálá, F. & Ciccone, A. (2004). Trade and Productivity. Quarterly Journal of Economics, 119(2), 613-646.
Alesina, A., Spolaore E, & Wacziarg R (2000). Economic Integration and Political Disintegration, American Economic Review, 90(5), 1276-1296.
Alexiou C, Tsaliki, P. & Osman, H. R. (2014). Institutional quality and economic growth: empirical evidence from the sudanese economy. Economic Annals, 59(203),119-137.
Alonso-Borrego, C., & Arellano, M. (1999). Symmetrically normalized instrumental-variable estimation using panel data. Journal of Business and Economic Statistics, 17(1), 36–49.
Anyanwu, J. C. (2014). Factors Affecting Economic Growth in Africa: Are There any Lessons from China? African Development Review, 26(3), 468–493.
Arellano, M. & Bond, S. (1991). Some tests of specification for panel data: Montecarlo evidence and an application to employment equations. Review of Economic Studies, 58(2), 277–297.
Arellano, M. & Bover, O. (1995). Another look at the instrumental-variable estimation of error-components models. Journal of Econometrics, 68(1), 29–52.
Arellano, M. & Bond, S. (1998). Dynamic Panel Data Estimation Using DPD98 for Gauss: a Guide for Users. Mimeo. CEMFI. Available at: ftp://ftp.cemfi.es/pdf/papers/ma/dpd98.pdf.
Asamoah, L. A., Mensah, E. K. & Bondzie, E. A. (2019).. Trade openness, FDI and economic growth in sub-Saharan Africa: do institutions matter?, Transnational Corporations Review, 11(1), 65-79, DOI: 10.1080/19186444.2019.1578156.
Asghar, N., Qureshi, S. & Nadeem, M. (2015). Institutional Quality and Economic Growth: Panel ARDL Analysis for Selected Developing Economies of Asia. A Research Journal of South Asian Studies, 30(2), 381 - 403.
Baltagi, B., Demitriades, P. & Law, S.H. (2007). Financial Development, Openness and Institutions: Evidence from Panel Data. Paper presented at the Conference on New Perspectives on Financial Globalization Research Department Hosted by the International Monetary Fund and Cornell University Washington, DC—April 26–27, 2007
Bhagwati, J.N. (1978). Foreign trade regimes and economic development: Anatomy and consequences of exchange control regime. Cambridge, MA: Ballinger.
Blundell, R. & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1), 115–143.
Bonnal, M. & Yaya, M.E. (2015). Political Institutions, Trade Openness, and Economic Growth: New Evidence. Emerging Markets Finance and Trade, 51(6), 1276-1291.
Brueckner, M. & Lederman, D. (2015). Trade Openness and Economic Growth: Panel Data Evidence from Sub-Saharan Africa. Economica, 82(s1), 1302–1323.
Canh, N. P., Schinckus, C. & Thanh, S. D. (2019).. Do economic openness and institutional quality influence patents? Evidence from GMM systems estimates. International Economics, 157, 134-169.
Chang, R., Kaltani, L. & Loayza, N.V. (2009). Openness can be good for growth: The role of policy complementarities. Journal of Development Economics, 90(1), 33–49
Chea, A.C. (2012). Sub-Saharan Africa and Global Trade: What Sub-Saharan Africa needs to do to maximize the Benefits from Global Trade Integration, Increase Economic Growth and Reduce Poverty? International Journal of Academic Research in Business and Social Sciences, 2, 359-84.
Coe, D.T. & Helpman, E. (1995). International R&D spillovers. European Economic Review, 39(5), 859–887. https://doi.org/10.1016/0014-2921(94).00100-E.
de Groot, H.L.F., Linders, G.J., Rietveld, P. & Subramanian, U. (2004). The Institutional Determinants of Bilateral Trade Patterns. Kyklos, 57(1), 103–123.
Dollar, D. (1992). Outward-Oriented Developing Economies Really Do Grow More Rapidly: Evidence from 95 LDCs, 1976-1985. Economic Development and Cultural Change, 40(3) 523-44.
Dollar, D. & Kraay, A. (2003a). Institutions, trade, and growth. Journal of Monetary Economics, 50(1) 133–162.
Dollar, D. & Kraay, A. (2003b). Institutions, Trade, and Growth: Revisiting the evidence, Policy Research Working Paper Series 3004, The World Bank, Washington.
Dowson, J.W. (1998). Institutions, Investment and Growth: New Cross-Country and Panel Data Evidence. Economic Inquiry, 36(4), 603-619.
Ebaidalla, E.M. (2014). Institutions and economic growth in Sub-Saharan Africa: a panel data analysis, African Journal of Economic and Sustainable Development, 3, 346-362.
Edwards, S. (1993). Openness, Trade Liberalization, and Growth in Developing Countries, Journal of Economic Literature, 31(3), 1358-1393.
Ezra, K. (1992). Royal Art of Benin: The Pearl collection. In Heilbrunn Timeline of Art History. New York: The Metropolitan Museum of Art. Available at http://www.metmuseum.org/toah/hd/aftr/hd_aftr.htm. (Accessed on 4/01/2018)..
Fenira, M. (2015). Trade openness and growth in developing countries: An analysis of the relationship after comparing trade indicators. Asian Economic and Financial Review, 5(3), 468–482.
Frankel, J.A. & Romer, D. (1999). Does trade cause growth? The American Economic Review, 89(3) 379–399.
Grosse-Wiesmann, G. (2007). Mobilizing aid for trade: A global review. Speech to General Council WTO. November 21-22, Germany.
Grossman, G.M. & Helpman, E. (1991a). Innovation and economic growth in the global economy. Cambridge, MA: MIT Press.
Grossman, G.M. & Helpman, E. (1991b). Trade, knowledge spillovers, and growth. European Economic Review, 35(2-3), 517–526.
Hadhek, Z. & Mrad, F. (2015). Trade Openness, Institutions and Economic Growth. European Journal of Economics, Finance and Administrative Sciences, 75, 96-104.
Hall, R.E. & Jone,s C. (1999). Why do some countries produce so much more output per worker than others? Quarterly Journal of Economics, 114(1), 83–116.
Hartzerberg, T. (2011). Africa needs a deeper integration agenda. WTO Research and Analysis, (July 6). 1-3.
Haussmann, R., Hwang, J. & Rodrik, D. (2007). What you export matters. Journal of Economic Growth, 12(1), 1–25.
Holtz-Eakin, D., Newey, W. & Rosen, H.S. (1988). Estimating vector autoregressions with panel data. Econometrica, 56(6), 1371–1395.
Jawaid, S.T. (2014). Trade Openness and Economic Growth: A Lesson from Pakistan. Foreign Trade Review, 49(2), 193–212.
Keho, Y. (2017). The impact of trade openness on economic growth: The case of Cote dIvoire. Cogent Economics and Finance, 5(1), 1-14
Kilishi, A. A., Mobolaji, H.I., Yaru, M.A. & Yakubu, A.T. (2013). Institutions and Economic Performance in Sub-Saharan Africa: A Dynamic Panel Data Analysis. Journal of African Development, 15(2), 91-120.
Knack, S., & Keefer, P. (1995).. Institutions and economic performance: Crossâ€country tests using alternative institutional measures. Economics & Politics, 7(3), 207–227.
Krueger, A. O. (1978). Foreign trade regimes and economic development: Liberalization attempts and consequences. Cambridge, MA: NBER
Law, S. H. & Azman-Saini, W.N.W. (2012). Institutional quality, governance and financial development. Economics of Governance, 13, 217–236.
Manwa, F., Wijeweera, A. & Kortt, M. A. (2019). Trade and growth in SACU countries: A panel data analysis. Economic Analysis and Policy, 63, 107–118
Manamba, E. & Kombe, A.H. (2017). Institutions and economic growth in Africa: Evidence from panel estimation. BEH- Business and Economic Horizons, 13(5), 570-590
Mangir, F., Kabaklarli, E. & Ayhan, F. (2017). An Analysis for The Relationship between Trade Openness and Economic Growth: Evidence for Ten African Countries. Journal of Management and Economic Research. 15(s1), 58-71
Manners, P. & Behar, A. (2007). Trade in Sub-Saharan Africa and Opportunities for Low Income Countries In Reshaping Economic Geography, WDR Background paper, World Bank Group.
Maruta, A. A. (2019).. Trade aid, institutional quality, and trade. Journal of Economics and Business, 103, 25-37.
Matthew, A.O. & Adegboye, B.F. (2014). Trade Openness, Institutions and Economic Growth in sub-Saharan Africa (SSA).. Developing Countries Studies. 4(8), 18-30
Méon, P.G. & Sekkat, K. (2008). Institutional Quality and Trade: Which Institutions? Which Trade? Economic Inquiry, 46(2), 227–240.
Musila, J.W. & Yiheyis, Z. (2015). The impact of trade openness on growth: The case of Kenya. Journal of Policy Modeling, 37(2), 342–354.
Oliva, M. A. & Rivera-Batiz, L.A. (2002). Political Institutions, Capital Flows, and Developing Country Growth: An Empirical Investigation. Review of Development Economics, 6(2), 248–262.
Persson,T. (2002). Do Political Institutions Shape Economic Policy? Econometrica, 70(3), 883–905.
Rassekh, F. (2007). Is international trade more beneficial to lower income economies? An empirical inquiry. Review of Development Economics, 11(1), 159–169.
Redding, S. & Venables, A. J. (2003). Geography and Export Performance: External market access and internal supply capacity, CEPR Discussion Paper Series, No. 3807, February.
Rigobon, R. & Rodrik, N. (2004). The Determinants of Institutions, Openness, and Income, MIT, mimeo.
Rigobon, R. & Rodrik, D. (2005). Rule of law, democracy, openness, and income: Estimating the Interrelationships. The Economics of Transition, 13(3), 533–564.
Rodriguez, F. & Rodrik, D. (2000). Trade Policy and Economic Growth: A Skeptics Guide to the Cross-National Evidence. NBER Working Paper No. 7081.
Roodman, D. (2007). A Short Note on the Theme of Too Many Instruments. Mimeo. Available at: http://ssrn.com/abstract=1101731.
Romer, P.M. (1994). New goods, old theory, and the welfare costs of trade restrictions. Journal of Development Economics, 43(1), 5–38. https://doi.org/10.1016/0304-3878(94).90021-3.
Sachs, J.D. & Warner, A. (1995). Economic Reform and the Process of Global Integration, in William C. Brainad & George L. Perry, (eds.)., Brookings Papers on Economic Activity 1, 1-118.
Sarkar, P. (2005). Is there any impact of trade liberalisation on growth? Experiences of India and Korea. MPRA Paper No. 5177
Tahir, M. & Azid, T. (2015). The relationship between international trade openness and economic growth in the developing economies: some new dimensions, Journal of Chinese Economic and Foreign Trade Studies, 8(2), 1-19.
UNCTAD (2012). Trade liberalization, investment and economic integration in African regional economic communities towards the African common market. New York: UNCTAD Publication
Ulaşan, B. (2015). Trade openness and economic growth: Panel evidence. Applied Economics Letters, 22,2 163–167. https://doi.org/10.1080/13504851.2014.931914.
Upreti, P. (2015). Factors Affecting Economic Growth in Developing Countries. Major Themes in Economics, (Spring), 17(1), 37-54.
Usenobong, F. A. & Johnson, A.A. (2016). Relationship between Trade Openness, Institutions and Economic Growth in Sub-Saharan Africa: A Further Look at the Evidence. British Journal of Economics, Management & Trade, 15(1), 1-20.
Valeriani, E. & Peluso, S. (2011). The Impact of Institutional Quality on Economic Growth and Development: An Empirical Study. Journal of Knowledge Management, Economics and Information Technology, 1(6), 1-25.
Vamvakidis, A. (2002).. How robust is the growth-openness connection: Historical evidence. Journal of Economic Growth, 7(1), 57–80. https://doi.org/10.1023/A:1013418610712
Zahonogo, P. (2016).. Trade and Economic Growth in Developing Countries: Evidence from Sub-Saharan Africa. Journal of African Trade, 3(1-2), 41-56.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2021 Taiwo AKINLO, Charles Olalekan OKUNLOLA
This work is licensed under a Creative Commons Attribution 4.0 International License.
