Trade, Trade Policy and Economic Growth in Sub-Saharan Africa
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Date
2005-06
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A.A.U
Abstract
In the SSA region poor trade and economic growth performances co-exist with a relatively
protective trade policy for the past three-decade. Some consider such protective trade policies as
the main causes of slow economic growth in the region. With an objective to see the impact of
trade and trade policy on economic growth, this paper employs a pure cross-sectional as well as
panel data (including panel co-integration) analysis techniques. We have controlled the observed
endogeneity of trade by using a simultaneous equations regression (2SLS method), and we also
run regressions with robust standard errors to handle problems related to the normality and
homogeneity assumptions.
Accordingly, while we have found trade shares (and also import and export shares in GDP) to be
significantly and positively correlated with growth, we get no evidence in support of trade
liberalization policies. That is, even if the trade policy variables reveal a significantly negative
impact on trade, they failed to show the same effect on growth contrary to the conventionally
alleged benefits of trade liberalization policies. The results show that there is a positive but
insignificant correlation between import tariff and economic growth whereas taxation of exports
reveals a positive but insignificant correlation. This shows the "possible" gains and losses from
a premeditated import protection and excessive export taxation respectively.
Key words: Trade and economic growth, Trade Policy, Panel data analysis
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Keywords
Panel Data Analysis, Trade Policy