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Can Africa export manufactures? The role of endowment, exchange rates, and transaction costs

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  • Elbadawi, Ibrahim A.

Abstract

The author analyzes the determinants of manufactured exports in Africa and other developing countries, guided by three pivotal views on Sub-Saharan Africa's (Africa's) prospects in manufactured exports: * Adrian Woods holds that Africa cannot have comparative advantage in exports of labor-intensive manufactures (even if broadly defined to include raw material processing) because its natural resources endowment is greater than its human resources endowment (endowment thesis). * Paul Collier argues that, for most of Africa, unusually high (policy-induced) transaction costs are the main source of Africa's comparative disadvantage in manufactured exports (transaction thessis). * A third approach (Elbadawi and Helleiner) emphasizes the importance of stable, competitive real exchange rates for profitability of exports in low-income countries (exchange rate-led strategy). The author tests the implications of these three views with an empirical model of manufactured export performance (manufactured exports'share of GDP), using a panel of 41 countries for 1980-95. His findings: * Corroborate the predictions of the transaction thesis, in that transaction costs are major determinants of manufactures exports. Investing in reducing these costs generates the highest payoff for export capacity. * Lend support for the exchange rate-led strategy. After controlling for other factors, ratios of natural resources per worker were not robustly associated with export performance across countries, but this cannot be taken as formal rejection of the endowment thesis - unless one is prepared to assume that manufactured exports'share of GDP was highly correlated with ratios of manufactured to aggregate (or primary) exports. But this is not unlikely.

Suggested Citation

  • Elbadawi, Ibrahim A., 1999. "Can Africa export manufactures? The role of endowment, exchange rates, and transaction costs," Policy Research Working Paper Series 2120, The World Bank.
    • Handle: RePEc:wbk:wbrwps:2120
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    References listed on IDEAS

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    1. Owens, Trudy & Wood, Adrian, 1997. "Export-oriented industrialization through primary processing?," World Development, Elsevier, vol. 25(9), pages 1453-1470, September.
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    6. Wood, Adrian, 1997. "Openness and Wage Inequality in Developing Countries: The Latin American Challenge to East Asian Conventional Wisdom," The World Bank Economic Review, World Bank, vol. 11(1), pages 33-57, January.
    7. John Williamson, 1994. "Estimating Equilibrium Exchange Rates," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 17, April.
    8. Adrian Wood & Kersti Berge, 1997. "Exporting manufactures: Human resources, natural resources, and trade policy," Journal of Development Studies, Taylor & Francis Journals, vol. 34(1), pages 35-59.
    9. Elbadawi, Ibrahim A., 1998. "Real Exchange Rate Policy and Non-Traditional Exports in Developing Countries," WIDER Working Papers 295341, United Nations University, World Institute for Development Economic Research (UNU-WIDER).
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    Cited by:

    1. Kuikeu, Oscar, 2012. "L'industrialisation par amélioration des infrastructures/technologies et attraction des investissements directs étrangers : cas de la zone franc [infrastructure/technology, foreign direct investmen," MPRA Paper 40072, University Library of Munich, Germany.
    2. Jonathan Munemo, 2011. "Foreign aid and export diversification in developing countries," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 20(3), pages 339-355.
    3. Mariem Brahim & Nader Nefzi & Hamed Sambo, 2017. "Remittances and the real effective exchange rates in MENA countries: What is the long run impact?," CEPN Working Papers 2017-15, Centre d'Economie de l'Université de Paris Nord.
    4. Ogundipe, Adeyemi & Amaghionyeodiwe, Lloyd, 2013. "Transnational Trade In Ecowas: Does Export Content Matter?," MPRA Paper 51617, University Library of Munich, Germany.
    5. Buys, Piet & Dasgupta, Susmita & Thomas, Timothy S. & Wheeler, David, 2009. "Determinants of a Digital Divide in Sub-Saharan Africa: A Spatial Econometric Analysis of Cell Phone Coverage," World Development, Elsevier, vol. 37(9), pages 1494-1505, September.
    6. Kuikeu, Oscar, 2020. "Épidémiologie de l’économie et confinement de l’Organisation COVID-19 [Epidemiologic aspect of the economy and Covid-19 lockdown as an Organisation]," MPRA Paper 103939, University Library of Munich, Germany.
    7. Dobdinga Cletus Fonchamnyo & Afuge Ramsy Akame, 2017. "Determinants of export diversification in Sub-Sahara African region: a fractionalized logit estimation model," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 41(2), pages 330-342, April.
    8. Kuikeu, Oscar, 2021. "Le Change: Résultat des Compétitions continentales Africaines. Le cas du CHAN 2021 [Exchange rate: issue of continental African competition. The case of AFCON 2021]," MPRA Paper 107025, University Library of Munich, Germany.
    9. Celbis, Mehmet Güney & Nijkamp, Peter & Poot, Jacques, 2013. "How big is the impact of infrastructure on trade? Evidence from meta-analysis," MERIT Working Papers 2013-032, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    10. repec:hal:cepnwp:hal-01583564 is not listed on IDEAS
    11. A. Wondemu Kifle & Potts David, 2016. "Working Paper 240 - The Impact of the Real Exchange Rate Changes on Export Performance in Tanzania and Ethiopia," Working Paper Series 2348, African Development Bank.
    12. Lawrence Edwards & Phil Alves, 2006. "South Africa'S Export Performance: Determinants Of Export Supply," South African Journal of Economics, Economic Society of South Africa, vol. 74(3), pages 473-500, September.
    13. Lahimer, Noomen, 2009. "La contribution des investissements directs étrangers à la réduction de la pauvreté en Afrique subsaharienne," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/1167 edited by Goaied, Mohamed & Bienaymé, Alain.
    14. Aye Mengistu, Alemu, 2009. "Determinants of Vertical and Horizontal Export Diversification: Evidences from Sub-Saharan Africa and East Asia," Ethiopian Journal of Economics, Ethiopian Economics Association, vol. 17(2), pages 107-107, August.
    15. Manamba EPAPHRA, 2016. "Determinants of Export Performance in Tanzania," Journal of Economics Library, KSP Journals, vol. 3(3), pages 470-487, September.
    16. Ibrahim A. Elbadawi, "undated". "Reviving Growth in the Arab World," API-Working Paper Series 0206, Arab Planning Institute - Kuwait, Information Center.
    17. Kuikeu, Oscar, 2021. "The main attempts of the making of an special economic area in Cameroon: lessons from the covid-19 crisis," MPRA Paper 107978, University Library of Munich, Germany.

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