Advances in Management and Applied Economics

An Empirical study on the determinants of trade openness in the African economies

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  • Abstract

     

    Trade openness for the African countries presents an avenue for gaining new knowledge, ideas and capital. These are amongst vital elements for innovation and enhanced productivity. To boost trade openness, this paper conducts an examination of the determinants of trade openness in the African countries. In examining these factors for the African countries, the study adopts an openness equation which is estimated using panel data approach for 49 African countries in the Africa from 1989 to 2009. The most important factors to boost trade openness in the African countries have been found to be the population size, the income per capita and economic location. The study however extends the model to include some important variables that currently explains much of African countries exports. Realising the increased growth of mining sector exports for many of African countries, mining sector as a proportion of GDP is included in the model; also agricultural production (measured as a proportion of countries’ GDP), and the multiplicative dummy variables that measures the magnitude effect of location effect on African regional blocks (i.e. East, Central, South, West and North Africa). Generally, these variables have proved to be able to explain a substantial proportion of African trade. However the empirical results in this paper shows also that the economic location of any of the African country matters in the analysis of the rate with which economies trade internationally. Given the scant research on trade openness for African countries especially on the determinants of trade openness, this paper provides the first empirical analysis on the factors that correlate with trade openness of Africa.

     

    JEL classification numbers: F1, F3, F4

    Keywords: Trade openness, international trade, openness equation, GDP per capita.