The Growth Effects of Openness to Trade and the Role of Institutions: New Evidence from African Countries

Leonce Ndikumana and Mina Baliamoune

UMASS Amherst Economics Working Papers from University of Massachusetts Amherst, Department of Economics

Abstract: In this paper, we explore the argument that one of the causes for the limited growth effects of trade openness in Africa may be the weakness of institutions. We also control for several major factors and, in particular, for export diversification, using a newly developed dataset on Africa. Results from Arellano-Bond GMM estimations on panel data from African countries show that institutions play an important role in enhancing the growth effects of trade. Moreover, we find that the joint effect of institutions and trade has a U-shape, suggesting that as openness to trade reaches high levels, institutions play a critical role in harnessing the trade-led engine of growth. The results from this paper are informative about the missing link between trade liberalization and growth in the case of African countries. JEL Categories:

Date: 2007-03
New Economics Papers: this item is included in nep-afr, nep-dev and nep-int
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Citations: View citations in EconPapers (44)

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Working Paper: The Growth Effects of Openness to Trade and the Role of Institutions: New Evidence from African Countries (2007)
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