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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.

Suggested Citation

  • Christian L., Nguena, 2012. "The Role of Foreign Trade in Economic Growth and Individual Heterogeneity Problem in Panel Data: The Case of African Countries," MPRA Paper 49559, University Library of Munich, Germany, revised 22 Mar 2013.
  • Handle: RePEc:pra:mprapa:49559
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    File URL: https://mpra.ub.uni-muenchen.de/49559/1/MPRA_paper_49559.pdf
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    References listed on IDEAS

    as
    1. Gene M. Grossman & Elhanan Helpman, 1991. "Quality Ladders in the Theory of Growth," Review of Economic Studies, Oxford University Press, vol. 58(1), pages 43-61.
    2. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    3. 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.
    4. Rivera-Batiz, Luis A. & Romer, Paul M., 1991. "International trade with endogenous technological change," European Economic Review, Elsevier, vol. 35(4), pages 971-1001, May.
    5. Krugman, Paul & Taylor, Lance, 1978. "Contractionary effects of devaluation," Journal of International Economics, Elsevier, vol. 8(3), pages 445-456, August.
    6. Lee, Jong-Wha, 1995. "Capital goods imports and long-run growth," Journal of Development Economics, Elsevier, vol. 48(1), pages 91-110, October.
    7. 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.
    8. 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.
    9. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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    More about this item

    Keywords

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

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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