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Foreign Aid, Resources and Export Diversification in Africa: A New Test of Existing Theories

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  • Osakwe, Patrick N.

Abstract

Recent theoretical literature suggests that aid, geography, and resource endowments affect diversification of exports in Africa. This paper examines the validity of these popular views using a System-GMM methodology and panel data for African countries. The evidence suggests that aid, the quality of infrastructure, and resource endowments are robust determinants of diversification in Africa. It also suggests that there is no systematic relationship between geography and diversification. Furthermore, there is some evidence that institutional factors are important although it is not robust. Finally, the paper offers recommendations on how to promote export diversification in the region.

Suggested Citation

  • Osakwe, Patrick N., 2007. "Foreign Aid, Resources and Export Diversification in Africa: A New Test of Existing Theories," MPRA Paper 2228, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:2228
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    File URL: https://mpra.ub.uni-muenchen.de/2228/1/MPRA_paper_2228.pdf
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    References listed on IDEAS

    as
    1. Ruffin, Roy J., 1974. "International trade under uncertainty," Journal of International Economics, Elsevier, vol. 4(3), pages 243-259, August.
    2. Jean Imbs & Romain Wacziarg, 2003. "Stages of Diversification," American Economic Review, American Economic Association, vol. 93(1), pages 63-86, March.
    3. Jeffrey D. Sachs & Andrew M. Warner, 1995. "Natural Resource Abundance and Economic Growth," NBER Working Papers 5398, National Bureau of Economic Research, Inc.
    4. repec:hoo:wpaper:e-92-3 is not listed on IDEAS
    5. Stephen Redding & Anthony Venables, 2004. "Geography and Export Performance: External Market Access and Internal Supply Capacity," NBER Chapters,in: Challenges to Globalization: Analyzing the Economics, pages 95-130 National Bureau of Economic Research, Inc.
    6. Matsuyama, Kiminori, 1992. "Agricultural productivity, comparative advantage, and economic growth," Journal of Economic Theory, Elsevier, vol. 58(2), pages 317-334, December.
    7. Redding, Stephen, 1999. "Dynamic Comparative Advantage and the Welfare Effects of Trade," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 15-39, January.
    8. Andrei A. Levchenko, 2007. "Institutional Quality and International Trade," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 791-819.
    9. Stephen J. Turnovsky, 1974. "Technological and Price Uncertainty in a Ricardian Model of International Trade," Review of Economic Studies, Oxford University Press, vol. 41(2), pages 201-217.
    10. Rodrik, Dani, 2005. "Policies for economic diversification," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    11. Wood, Adrian & Mayer, Jorg, 2001. "Africa's Export Structure in a Comparative Perspective," Cambridge Journal of Economics, Oxford University Press, vol. 25(3), pages 369-394, May.
    12. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    13. Chang, P. H. Kevin, 1991. "Export diversification and international debt under terms-of-trade uncertainty : An intertemporal approach," Journal of Development Economics, Elsevier, vol. 36(2), pages 259-277, October.
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    Citations

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    Cited by:

    1. Amighini, Alessia & Sanfilippo, Marco, 2014. "Impact of South–South FDI and Trade on the Export Upgrading of African Economies," World Development, Elsevier, vol. 64(C), pages 1-17.
    2. Gnangnon, Sèna Kimm & Roberts, Michael, 2015. "Aid for trade, foreign direct investment and export upgrading in recipient countries," WTO Staff Working Papers ERSD-2015-10, World Trade Organization (WTO), Economic Research and Statistics Division.
    3. Jonathan Munemo, 2011. "Foreign aid and export diversification in developing countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 20(3), pages 339-355.
    4. Eduard Marinov, 2013. "International trade commodity structure of African regional integration communities (English)," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 135-151.
    5. repec:wsi:jicepx:v:08:y:2017:i:02:n:s1793993317500107 is not listed on IDEAS
    6. Naude, Wim & Rossouw, Riaan, 2008. "Export Diversification and Specialization in South Africa: Extent and Impact," WIDER Working Paper Series 093, World Institute for Development Economic Research (UNU-WIDER).
    7. Marinov, Eduard, 2014. "Регионална Икономическа Интеграция В Африка (Дисертация)
      [Regional Economic Integration in Africa (Ph.D. Thesis, full text)]
      ," MPRA Paper 60591, University Library of Munich, Germany.
    8. Kivilcim Metin Özcan & Nur Sevim Kafali, 2007. "The Structure of the Turkish Banking Sector After the 2000-2001 Crisis: An Empirical Investigation," Working Papers 709, Economic Research Forum, revised 01 Jan 2007.
    9. Foster-McGregor, Neil & Kaba, Ibrahima & Szirmai, Adam, 2015. "Structural change and the ability to sustain growth," MERIT Working Papers 048, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    10. Ndambendia, Houdou, 2014. "Exports diversification and knowledge sharing from south-south and south-north economic cooperation: evidence from the Central and West Africa," MPRA Paper 71571, University Library of Munich, Germany, revised 2015.

    More about this item

    Keywords

    Exports; Aid; Diversification; Africa; Endowments;

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F35 - International Economics - - International Finance - - - Foreign Aid

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