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The Growth Effects of Openness to Trade and the Role of Institutions: New Evidence from African Countries

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  • Léonce Ndikumana

    ()
    (University of Massachusetts, Amherst, and UNECA, Addis Ababa)

  • Mina Baliamoune-Lutz

    ()
    (University of North Florida and IED/Boston University)

Abstract

In this paper, we explore the argument that one of the causes for the limited growth effects of trade openness in Africa may be the weakness of institutions. We also control for several major factors and, in particular, for export diversification, using a newly developed dataset on Africa. Results from Arellano-Bond GMM estimations on panel data from African countries show that institutions play an important role in enhancing the growth effects of trade. Moreover, we find that the joint effect of institutions and trade has a U-shape, suggesting that as openness to trade reaches high levels, institutions play a critical role in harnessing the trade-led engine of growth. The results from this paper are informative about the missing link between trade liberalization and growth in the case of African countries. JEL Categories:

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Paper provided by University of Massachusetts Amherst, Department of Economics in its series UMASS Amherst Economics Working Papers with number 2007-05.

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Date of creation: Mar 2007
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Handle: RePEc:ums:papers:2007-05

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  1. Lopez, Ramon, 1991. "How trade and macroeconomic policies affect economic growth and capital accumulation in developing countries," Policy Research Working Paper Series 625, The World Bank.
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  16. Sachs, Jeffrey D & Warner, Andrew M, 1997. "Fundamental," American Economic Review, American Economic Association, vol. 87(2), pages 184-88, May.
  17. repec:rus:hseeco:72137 is not listed on IDEAS
  18. Schneider, Patricia Higino, 2005. "International trade, economic growth and intellectual property rights: A panel data study of developed and developing countries," Journal of Development Economics, Elsevier, vol. 78(2), pages 529-547, December.
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Citations

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Cited by:
  1. Mina Baliamoune-Lutz, 2008. "On Growth and Development," ICER Working Papers 13-2008, ICER - International Centre for Economic Research.
  2. Wamboye, Evelyn, 2012. "Quantity or quality? foreign aid implications on economic growth in least developed countries," MPRA Paper 39518, University Library of Munich, Germany.
  3. Zaouali, Amira, 2014. "Terms of Trade Instability, Economic Vulnerability and Economic Growth: The Role Of Institutions in Sub-Saharan Africa," MPRA Paper 52939, University Library of Munich, Germany.
  4. Mina Baliamoune-Lutz, 2010. "Growth by Destination (Where you Export Matters): Trade with China and Growth in African Countries," ICER Working Papers 22-2010, ICER - International Centre for Economic Research.
  5. Thierry Verdier, 2010. "Regional Integration, Fragility and Institution Building: An Analytical Framework Applied to the African Context," EUI-RSCAS Working Papers 38, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
  6. Mina Baliamoune-Lutz, 2007. "Entrepreneurship, Reforms, and Development: Empirical Evidence," ICER Working Papers 38-2007, ICER - International Centre for Economic Research.
  7. Isaksson, Ann-Sofie, 2008. "Social divisions and institutions: Assessing institutional parameter variation," Working Papers in Economics 282, University of Gothenburg, Department of Economics, revised 01 Aug 2008.
  8. Baliamoune-Lutz, Mina, 2009. "Institutions, trade, and social cohesion in fragile states: Implications for policy conditionality and aid allocation," Journal of Policy Modeling, Elsevier, vol. 31(6), pages 877-890, November.
  9. Mina Baliamoune-Lutz, 2011. "Do institutions and social cohesion enhance the effectiveness of aid? New Evidence from Africa," ICER Working Papers 13-2011, ICER - International Centre for Economic Research.
  10. Léonce Ndikumana & Mina Baliamoune-Lutz, 2008. "Corruption and Growth: Exploring the Investment Channel," UMASS Amherst Economics Working Papers 2008-08, University of Massachusetts Amherst, Department of Economics.
  11. Baliamoune-Lutz, Mina, 2009. "Entrepreneurship and Reforms in Developing Countries," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  12. Mina Baliamoune-Lutz, 2010. "Financial Development and Income in Developing Countries," ICER Working Papers 09-2010, ICER - International Centre for Economic Research.

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