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Trade performance and potential of North African countries: An application of a stochastic frontier gravity model

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  • Abdessalem Abassi
  • Lota Dabio Tamini

Abstract

The objective of this paper is to analyze trade potential versus actual realized trade among North African trading partners. Following the literature on production economics, we built a stochastic frontier gravity model. The underlying assumption is that all deviation from trade potential is not due to white noise but could also be due to inefficiencies. Time-variant country-specific trade efficiency estimates are obtained and analyzed. Our results indicate that Mauritania as a country of destination and of origin is where the trading relationship is the least efficient. Conversely, Tunisia, followed by Morocco, faces the fewest ÒbehindÓ and ÒbeyondÓ the border effects. Our analysis of market integration and trade efficiency at the disaggregated level indicates that trade efficiency scores exhibit high variability between the categories of products. Moreover, North African market integration is worst when considering the goods from the category ÒTextiles; Footwear & HeadgearÓ. Our estimates indicate that trade efficiency for agricultural products is relatively low indicating the existence of significant ÒbehindÓ and ÒbeyondÓ border inefficiencies. Our estimates also point at the presence of poor and counterproductive regulatory environment and underline the importance of improving domestic policies to encourage entrepreneurial development and business facilities. Our findings confirm the need for the North African countries to improve their trade logistics at the national level to enhance trade efficiency and to implement trade facilitation reform programs.

Suggested Citation

  • Abdessalem Abassi & Lota Dabio Tamini, 2016. "Trade performance and potential of North African countries: An application of a stochastic frontier gravity model," Cahiers de recherche CREATE 2016-4, CREATE.
    • Handle: RePEc:lvl:creacr:2016-4
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    Cited by:

    1. Memduh Alper Demir & Mustafa Bilik & Utku Utkulu, 2017. "The Impact of Competitiveness on Trade Efficiency: The Asian Experience by Using the Stochastic Frontier Gravity Model," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 5(4), pages 1-15.
    2. Djontu, Bruno Legrand, 2022. "Déterminants et efficacité des exportations camerounaises des produits agricoles : Une application du modèle de gravité à la frontière stochastique [Determinants and potential of Cameroon’s agricul," MPRA Paper 113959, University Library of Munich, Germany, revised 01 Aug 2022.
    3. Ebaidalla Mahjoub Ebaidalla & Mohammed Elhaj Mustafa Ali, 2018. "Assessing the Intra-Arab Trade Integration and Potential: Evidence from Stochastic Frontier Gravity Model," Working Papers 1247, Economic Research Forum, revised 07 Nov 2018.
    4. Xu, Jiayue & Lu, Caiwu & Ruan, Shunling & Xiong, Neal N., 2022. "Estimating the efficiency and potential of China's steel products export to countries along the “Belt and Road” under interconnection: An application of extended stochastic frontier gravity model," Resources Policy, Elsevier, vol. 75(C).

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    More about this item

    Keywords

    Trade integration; Industrial products; Agricultural products; Stochastic frontier analysis; Gravity model; North Africa.;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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