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Why Has Trade Barely Moved Sub-Saharan Africa to Its Economic Potential?

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  • Brian Tavonga Mazorodze

    (School of Economic and Management Sciences, Sol Plaatje University, Kimberley 8301, South Africa)

Abstract

The rise in global trade volumes since the early 90s has been welcomed by many under the notion that trade helps countries edge closer to their economic potential. A concerning observation, however, is that while Asia, Latin America, and Europe seem to have witnessed a discernible rise in per capita income during this period and moved closer to their economic potential, sub-Saharan Africa (SSA) does not seem to have recorded as much success. Defining economic potential as maximum possible income from given resources and existing technology, the results presented here for a panel of 22 sub-Saharan countries observed between 1995 and 2021 confirm that the region’s ability to edge closer to its full potential was heavily undermined by its small and shrinking manufacturing sector, a result that is replicated by counterfactual methods. In policy senses against this background, SSA may need to reconsider its widespread deindustrialization model and rejuvenate manufacturing. This policy implication feeds into the broader discussion of premature deindustrialization in SSA and its economic consequences. Evidence suggests that reversing this trend through expanding manufacturing potentially lifts about 50% of the sampled countries (including Rwanda, Togo, Guinea, Niger, Sierra-Leone, Gambia, Benin, Uganda, and Mozambique) from low-income status to middle-income status.

Suggested Citation

  • Brian Tavonga Mazorodze, 2023. "Why Has Trade Barely Moved Sub-Saharan Africa to Its Economic Potential?," Economies, MDPI, vol. 11(10), pages 1-27, October.
    • Handle: RePEc:gam:jecomi:v:11:y:2023:i:10:p:259-:d:1263492
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    References listed on IDEAS

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    3. Eric Evans Osei Opoku & Isabel Kit-Ming Yan, 2019. "Industrialization as driver of sustainable economic growth in Africa," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 28(1), pages 30-56, January.
    4. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
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