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The Role of Foreign Trade in Economic Growth and Individual Heterogeneity Problem in Panel Data: The Case of African Countries

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  • CHRISTIAN L., NGUENA

Abstract

In this work we proposed to analyze the problem of individual heterogeneity in panel data and implement resolution to verify the role of foreign trade on economic growth in Sub-Saharan Africa. The purpose was to verify improvement in terms of specification and estimation of economic growth model, linked to the consideration or not of individual heterogeneity. To achieve this we have used two models, one taking into account the individual heterogeneity and the other not, to estimate and compare their result. From this comparison, it appears that taking into account individual heterogeneity improves the quality of the model. This implies that the same economic policy may lead to different results in different countries. Thus, it is desirable that economic policy decision for several countries must consider their individual characteristics before implementation. However, the study reveals a positive impact of foreign trade on Sub-Saharan Africa countries economic growth. This paper provides warning signs to African continental integration by highlighting countries heterogeneity and policy coordination issue.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 49559.

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Date of creation: 03 Feb 2012
Date of revision: 22 Mar 2013
Handle: RePEc:pra:mprapa:49559

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Keywords: individual heterogeneity; panel data; foreign trade; economic growth.;

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  1. Redding, S., 1997. "Dynamic Comparative Advantage and the Welfare Effects of Trade," Economics Papers 140, Economics Group, Nuffield College, University of Oxford.
  2. Luis A. Rivera-Batiz & Paul M. Romer, 1991. "International Trade with Endogenous Technological Change," NBER Working Papers 3594, National Bureau of Economic Research, Inc.
  3. Barro, Robert J., 1990. "Government Spending in a Simple Model of Endogeneous Growth," Scholarly Articles 3451296, Harvard University Department of Economics.
  4. Grossman, G.M. & Helpman, E., 1989. "Quality Ledders In The Theory Of Growth," Papers 148, Princeton, Woodrow Wilson School - Public and International Affairs.
  5. Paul R. Krugman, 1987. "Trigger Strategies and Price Dynamics in Equity and Foreign Exchange Markets," NBER Working Papers 2459, National Bureau of Economic Research, Inc.
  6. Krugman, Paul & Taylor, Lance, 1978. "Contractionary effects of devaluation," Journal of International Economics, Elsevier, vol. 8(3), pages 445-456, August.
  7. Lee, Jong-Wha, 1995. "Capital goods imports and long-run growth," Journal of Development Economics, Elsevier, vol. 48(1), pages 91-110, October.
  8. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  9. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
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