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Trade Openness, Trade Costs and Growth: Why Sub-Saharan Africa Performs Poorly

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  • Jennifer Mbabazi,
  • Chris Milner,
  • Oliver Morrissey

Abstract

The principal aim of this paper is to identify, in the context of the relationship between openness and growth, factors that can account for the poor growth performance of sub-Saharan African (SSA) countries. Including inequality as a broad measure of policy distortions, attention focuses on policy and non-policy barriers to trade, indicators of openness and resource endowments. The empirical analysis uses cross-section and panel econometric techniques to investigate the links between growth, inequality and openness for a sample of 44 developing countries over 1970-95. There are four broad conclusions. First, within the sample, there is a low correlation between initial GDP and inequality. Second, inequality appears to have a robust negative effect on growth in the long run but not in the short run. Third, we find consistent evidence that openness is positively associated with growth, and some evidence that trade liberalisation tends to offset or dampen the negative effect of inequality on growth. Finally, Africa does appear to be different; the especially poor SSA growth performance can be explained by the combination of low levels of openness, high natural barriers to trade (especially highcosts of transport to distant dynamic markets) and export dependence on primary commodities.

Suggested Citation

  • Jennifer Mbabazi, & Chris Milner, & Oliver Morrissey, 2006. "Trade Openness, Trade Costs and Growth: Why Sub-Saharan Africa Performs Poorly," Discussion Papers 06/08, University of Nottingham, CREDIT.
    • Handle: RePEc:not:notcre:06/08
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    References listed on IDEAS

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    Cited by:

    1. Simplice Anutechia, Asongu, 2010. "Linkages between Financial Development and Openness: panel evidence from developing countries," MPRA Paper 26926, University Library of Munich, Germany.
    2. Ebo Turkson & Abena D. Oduro & Priscilla Twumasi Baffour & Peter Quartey, 2023. "Regional integration and non‐tariff barriers to Intra‐Sub‐Saharan Africa trade," The World Economy, Wiley Blackwell, vol. 46(2), pages 396-414, February.
    3. Simplice A., Asongu, 2011. "Globalization, financial allocation efficiency and regional economic dynamics: asymmetric panel evidence from Africa," MPRA Paper 33901, University Library of Munich, Germany.
    4. Festus Ebo Turkson, 2011. "Logistics and Bilateral Exports in Developing Countries: A Multiplicative Form Estimation of the Logistics Augmented Gravity Equation," Discussion Papers 11/06, University of Nottingham, CREDIT.
    5. Simplice A, Asongu, 2010. "Financial development, trade openness and financial openness: do income levels matter for developing countries?," MPRA Paper 27441, University Library of Munich, Germany.

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