IDEAS home Printed from https://ideas.repec.org/p/not/notcre/06-08.html
   My bibliography  Save this paper

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

Author

Listed:
  • 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.

Suggested Citation

  • Jennifer Mbabazi, & Chris Milner, & Oliver Morrissey, 2006. "Trade Openness, Trade Costs and Growth: Why Sub-Saharan Africa Performs Poorly," Discussion Papers 06/08, University of Nottingham, CREDIT.
    • Handle: RePEc:not:notcre:06/08
    as

    Download full text from publisher

    File URL: https://www.nottingham.ac.uk/credit/documents/papers/06-08.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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, vol. 6(3), pages 335-376, October.
    2. Jan Willem Gunning & Paul Collier, 1999. "Explaining African Economic Performance," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 64-111, March.
    3. 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.
    4. Owens, Trudy & Wood, Adrian, 1997. "Export-oriented industrialization through primary processing?," World Development, Elsevier, vol. 25(9), pages 1453-1470, September.
    5. Jorg Mayer & Adrian Wood, 2001. "South Asia's Export Structure in a Comparative Perspective," Oxford Development Studies, Taylor & Francis Journals, vol. 29(1), pages 5-29.
    6. 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, September.
    7. 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 1547-1561, September.
    8. Clarke, George R. G., 1995. "More evidence on income distribution and growth," Journal of Development Economics, Elsevier, vol. 47(2), pages 403-427, August.
    9. 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.
    10. Stephen Knowles, 2005. "Inequality and Economic Growth: The Empirical Relationship Reconsidered in the Light of Comparable Data," Journal of Development Studies, Taylor & Francis Journals, vol. 41(1), pages 135-159.
    11. Edwards, Sebastian, 1993. "Openness, Trade Liberalization, and Growth in Developing Countries," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1358-1393, September.
    12. Wood, Adrian & Mayer, Jorg, 2001. "Africa's Export Structure in a Comparative Perspective," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 25(3), pages 369-394, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Simplice Anutechia, Asongu, 2010. "Linkages between Financial Development and Openness: panel evidence from developing countries," MPRA Paper 26926, University Library of Munich, Germany.
    2. Ebo Turkson & Abena D. Oduro & Priscilla Twumasi Baffour & Peter Quartey, 2023. "Regional integration and non‐tariff barriers to Intra‐Sub‐Saharan Africa trade," The World Economy, Wiley Blackwell, vol. 46(2), pages 396-414, February.
    3. 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.
    4. Festus Ebo Turkson, 2011. "Logistics and Bilateral Exports in Developing Countries: A Multiplicative Form Estimation of the Logistics Augmented Gravity Equation," Discussion Papers 11/06, University of Nottingham, CREDIT.
    5. 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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jennifer Mbabazi & Oliver Morrissey & Chris Milner, 2001. "Are Inequality and Trade Liberalization Influences on Growth and Poverty?," WIDER Working Paper Series DP2001-132, World Institute for Development Economic Research (UNU-WIDER).
    2. Augustin Kwasi Fosu, 2000. "The International Dimension of African Economic Growth," CID Working Papers 34, Center for International Development at Harvard University.
    3. Rune Jansen Hagen, 2002. "Marginalisation in the Context of Globalisation: Why Is Africa so Poor?," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 28, pages 147-179.
    4. Dierk Herzer & Sebastian Vollmer, 2012. "Inequality and growth: evidence from panel cointegration," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 10(4), pages 489-503, December.
    5. Francis Teal, 1999. "Why can Mauritius export manufactures and Ghana not?," Economics Series Working Papers WPS/1999-10, University of Oxford, Department of Economics.
    6. Adalgiso Amendola & Roberto Dell�Anno, 2014. "Income inequality and economic growth: an empirical investigation in Mediterranean countries," RIEDS - Rivista Italiana di Economia, Demografia e Statistica - The Italian Journal of Economic, Demographic and Statistical Studies, SIEDS Societa' Italiana di Economia Demografia e Statistica, vol. 68(2), pages 35-58, April-Jun.
    7. Oskam, A.J. & Komen, M.H.C. & Wobst, P. & Yalew, A., 2004. "Trade policies and development of less-favoured areas: evidence from the literature," Food Policy, Elsevier, vol. 29(4), pages 445-466, August.
    8. Ademola Obafemi Young, 2019. "Growth Impacts of Income Inequality: Empirical Evidence From Nigeria," Research in World Economy, Research in World Economy, Sciedu Press, vol. 10(3), pages 226-262, December.
    9. Gravier-Rymaszewska, Joanna & Tyrowicz, Joanna & Kochanowicz, Jacek, 2010. "Intra-provincial inequalities and economic growth in China," Economic Systems, Elsevier, vol. 34(3), pages 237-258, September.
    10. World Bank, 2005. "The Cost of Doing Business in Africa : Evidence from the World Bank’s Investment Climate Data," World Bank Publications - Reports 8769, The World Bank Group.
    11. Brida, Juan Gabriel & Carrera, Edgar J. Sanchez & Segarra, Verónica, 2020. "Clustering and regime dynamics for economic growth and income inequality," Structural Change and Economic Dynamics, Elsevier, vol. 52(C), pages 99-108.
    12. Lahimer, Noomen, 2009. "La contribution des investissements directs étrangers à la réduction de la pauvreté en Afrique subsaharienne," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/1167 edited by Goaied, Mohamed & Bienaymé, Alain.
    13. Ravallion, Martin, 2003. "Targeted transfers in poor countries : revisiting the tradeoffs and policy options," Policy Research Working Paper Series 3048, The World Bank.
    14. Roberto Dell'Anno & Adalgiso Amendola, 2015. "Social Exclusion and Economic Growth: An Empirical Investigation in European Economies," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 61(2), pages 274-301, June.
    15. Jakub Bartak & Łukasz Jabłoński, 2020. "Inequality and growth: What comes from the different inequality measures?," Bulletin of Economic Research, Wiley Blackwell, vol. 72(2), pages 185-212, April.
    16. Adelaide Duarte & Marta Simões, 2009. "Channels of transmission of inequality to growth: A survey of the theory and evidence from a Portuguese perspective," GEMF Working Papers 2009-07, GEMF, Faculty of Economics, University of Coimbra.
    17. Muhammad Tariq MAJEED, 2010. "Inequality, Trade Openness And Economic Growth In Asia," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 10(2).
    18. Marrero, Gustavo A. & Rodríguez, Juan G., 2013. "Inequality of opportunity and growth," Journal of Development Economics, Elsevier, vol. 104(C), pages 107-122.
    19. Charles Ackah, & Oliver Morrissey, 2007. "Trade Liberalisation is Good for You if You are Rich," Discussion Papers 07/01, University of Nottingham, CREDIT.
    20. Bleaney, Michael & Nishiyama, Akira, 2004. "Income inequality and growth--does the relationship vary with the income level?," Economics Letters, Elsevier, vol. 84(3), pages 349-355, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:not:notcre:06/08. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Hilary Hughes (email available below). General contact details of provider: https://edirc.repec.org/data/cenotuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.