Regional Integration Agreements and Rent-Seeking in Africa

This paper explores the motives behind the formation of intra-African regional integration agreements (RIAs). We aim to see whether rent-seeking can be identified as a statistically significant driving force of African integration. The traditional reason for economic integration, the static and dynamic effects, predict no or even a negative effect on welfare. Moreover, many of the new regionalism theories are conditional on strong economic integration. Two exceptions are rent-seeking behavior and the regime boosting hypothesis. Not only can they credibly explain the proliferation of African trade agreements in the absence of a positive effect on welfare, they can also account for the lack of progress in clearing away the many obstructions to regional trade. Because most African agreements involve more than two partner countries, the decision to enter a RIA cannot be analyzed by examining agreements between pairs of countries. Instead, we propose regressing whether a country is a member of a certain agreement on the characteristics of both country and agreement. We find that corruption does have an effect on the willingness to join RIAs, but that it is strongly dependent on the level of GDP. Moreover, for a given level of GDP the effect of corruption is non-linear.