Determinants of Trade in Services in Africa: A Gravity Model Approach
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2011-06
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Addis Ababa University
Abstract
Despite its stage of infancy, trade in services in Africa is expected to improve the poor portfolio and destination diversification. In order this to happen, there is a need to study the determinants and the directions of Africa’s service trade. This paper intends to study the factors that affect the bilateral trade in services using a gravity model approach for a 5 year data spanning from 2003-2007. The finding of this research reveals that GDP per capita and total labor force of the African nations and their partnering nations positively affect the trade in services. An improved access to the internet also promotes the trade in services in Africa. Contrary to this, devaluation affects the service trade negatively. Land-locked African nations have lower participation than that of the costal nations. In relation to this distance has also a negative impact on service. The effects if land lockedness and distance between the capital cities of the partnering nations are reflected through the low level of GDP that land locked nations experience as a result of their poor trade performance as a whole. The other interesting finding is that the trade direction of the African nations is with their ex-colonial masters, captured through the effect of the variables called colonial history and common language.
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Trade in Services in Africa