Trading Costs in Africa: Does International Supply Chain Connectivity Matter?

Since Samuelson¡¯s seminal 1954 contribution, trade costs are recognized as an important determinant of country¡¯s ability to take part in Regional and Global Value Chains. Previous empirical studies, however, have analyzed the determinants of trade costs in the context of developing countries in general and have ignored the specific case of African countries. This paper use gravity model to assess the impact of international supply chain connectivity performance on trade costs. The model includes 169 countries over the 2006-2015 periods. Our results suggest that, the improvement of the African countries¡¯ international supply chain connectivity performance reduces trade costs in the region. This result hold when we estimate intra-African and extra-African trade costs separately suggesting that a country¡¯s ability to reduce trade costs and trade globally depends on its connectivity on international supply chain. The results also suggest that, deep regional integration within Africa, contiguity, colonial links, common language and common currency affect trade costs negatively.