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Trade Openness, Trade Costs and Growth: Why Sub-Saharan Africa Performs Poorly

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  • Jennifer Mbabazi,
  • Chris Milner,
  • Oliver Morrissey

Abstract

The principal aim of this paper is to identify, in the context of the relationship between openness and growth, factors that can account for the poor growth performance of sub-Saharan African (SSA) countries. Including inequality as a broad measure of policy distortions, attention focuses on policy and non-policy barriers to trade, indicators of openness and resource endowments. The empirical analysis uses cross-section and panel econometric techniques to investigate the links between growth, inequality and openness for a sample of 44 developing countries over 1970-95. There are four broad conclusions. First, within the sample, there is a low correlation between initial GDP and inequality. Second, inequality appears to have a robust negative effect on growth in the long run but not in the short run. Third, we find consistent evidence that openness is positively associated with growth, and some evidence that trade liberalisation tends to offset or dampen the negative effect of inequality on growth. Finally, Africa does appear to be different; the especially poor SSA growth performance can be explained by the combination of low levels of openness, high natural barriers to trade (especially highcosts of transport to distant dynamic markets) and export dependence on primary commodities.

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Bibliographic Info

Paper provided by University of Nottingham, CREDIT in its series Discussion Papers with number 06/08.

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Handle: RePEc:not:notcre:06/08

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Postal: School of Economics University of Nottingham University Park Nottingham NG7 2RD
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Related research

Keywords: Openness; Transport Costs; Trade and Growth; Sub-Saharan Africa.;

References

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  1. Keefer, Philip & Knack, Stephen, 1997. "Why Don't Poor Countries Catch Up? A Cross-National Test of Institutional Explanation," Economic Inquiry, Western Economic Association International, vol. 35(3), pages 590-602, July.
  2. Clarke, George R. G., 1992. "More evidence on income distribution and growth," Policy Research Working Paper Series 1064, The World Bank.
  3. Paul Collier & Jan Willem Gunning, 1997. "Explaining African economic performance," CSAE Working Paper Series 1997-02.2, Centre for the Study of African Economies, University of Oxford.
  4. Deininger, Klaus & Squire, Lyn, 1998. "New ways of looking at old issues: inequality and growth," Journal of Development Economics, Elsevier, vol. 57(2), pages 259-287.
  5. Owens, Trudy & Wood, Adrian, 1997. "Export-oriented industrialization through primary processing?," World Development, Elsevier, vol. 25(9), pages 1453-1470, September.
  6. Wood, Adrian & Mayer, Jorg, 2001. "Africa's Export Structure in a Comparative Perspective," Cambridge Journal of Economics, Oxford University Press, vol. 25(3), pages 369-94, May.
  7. Oliver Morrissey & Doug Nelson, 1998. "East Asian Economic Performance: Miracle or Just a Pleasant Surprise?," The World Economy, Wiley Blackwell, vol. 21(7), pages 855-879, 09.
  8. Sachs, Jeffrey D & Warner, Andrew M, 1997. "Sources of Slow Growth in African Economies," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(3), pages 335-76, October.
  9. Greenaway, David & Morgan, Wyn & Wright, Peter W, 1998. "Trade Reform, Adjustment and Growth: What Does the Evidence Tell Us?," Economic Journal, Royal Economic Society, vol. 108(450), pages 1547-61, September.
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Cited by:
  1. Simplice A., Asongu, 2011. "Globalization, financial allocation efficiency and regional economic dynamics: asymmetric panel evidence from Africa," MPRA Paper 33901, University Library of Munich, Germany.
  2. Simplice Anutechia, Asongu, 2010. "Linkages between Financial Development and Openness: panel evidence from developing countries," MPRA Paper 26926, University Library of Munich, Germany.
  3. Simplice A, Asongu, 2010. "Financial development, trade openness and financial openness: do income levels matter for developing countries?," MPRA Paper 27441, University Library of Munich, Germany.

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