TRADE, STRUCTURAL REFORM, AND INSTITUTIONS IN SUB-SAHARAN AFRICA

Authors

  • DJETO ASSANE,

    1. Assane: Associate Professor, Department of Economics, University of Nevada Las Vegas, Las Vegas, NV 89154-6005. Phone 702-895-3284, Fax 702-895-1354, E-mail djeto.assane@unlv.edu
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  • ERIC P. CHIANG

    1. Chiang: Associate Professor, Department of Economics, KH 137, Florida Atlantic University, 777 Glades Road, Boca Raton, FL 33431. Phone 561-297-2947, Fax 561-297-2542, E-mail chiang@fau.edu
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    • We are especially grateful to Craig MacPhee, Jack Hou, Clement Wong, Janice Hauge, and Jean-Claude Maswana for insightful comments and to Elvis Fong for providing outstanding research assistance. We also thank two anonymous referees and Craig Depken for providing excellent suggestions on an earlier draft. An earlier version of this article was presented at the Western Economic Association International 85th Annual Conference, Portland (Oregon), June 29–July 3, 2010.


Abstract

Sub-Saharan African countries have traditionally lagged the rest of the developing world in terms of overall trade relative to gross domestic product. But, there is growing interest among these countries to initiate trade policies and improve quality of institutions as a way to promote trade and boost foreign direct investment. This article extends the gravity model of trade to include proxies for trade reform policy and institutional quality among the 15 countries of the Economic Community of West African States (ECOWAS) for data spanning 1984–2006. Alternative methods of estimation based on ordinary least squares, Heckman two-step procedure, and Poisson pseudo-maximum likelihood produce predictions that are consistent with the standard gravity model. They further highlight the evidence of restrictive trade policies and weak institutions that contribute to the failure of ECOWAS countries to boost bilateral trade. (JEL F13, F15, O19, O55)

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