Structural Change And Trade Openness in sub-Saharan African Countries

In this paper, we study the role of trade openness in the economic reallocation from the agriculture to the manufacturing sector in 34 sub-Saharan African countries between 1970-2016. The results show that the long term evolution of trade openness negatively impacts the long-run and the short-run dynamics of structural change. Moreover, this impact goes through aggregate exports not aggregate imports. By breaking down global exports, we find that commodities exports have a negative impact while manufacturing exports positively impact structural change. These results are explained by the fact that, contrary to Asian countries, African countries have failed to put trade at the service of industrialization by following the logic of comparative advantage. More precisely, they have failed to invest the revenues from commodities exports to improve the quality of infrastructure in order to remove the constraints on the relocation to labor-intensive manufacturing activities. Unlike previous studies, we address the endogeneity problem by using a dynamic ordinary least squares method after a pooled mean group method.