African Economy Essay

9253 WordsJun 27, 201138 Pages
Growth by destination (where you export matters): Trade with China and growth in African countries* Mina Baliamoune-Lutz Professor and Kip Fellow of Economics University of North Florida And Research Fellow, ICER (Italy) Email: Draft 1.1 (August 28, 2010) Abstract I perform Arellano-Bond GMM estimations using panel data over the period 1995-2008 and explore the growth effects of Africa’s trade with China, distinguishing between the effect of imports and the effect of exports, and controlling for the role of export concentration. Four important results are obtained from the empirical analysis. First, there is no empirical evidence that exports to China enhance growth unconditionally. Second, the results suggest that export concentration enhances the growth effects of exporting to China, implying that countries which export one major commodity to China benefit more (in terms of growth) than do countries that have more diversified exports. Third, contrary to the widely held view that increasing imports from China would have a negative effect, the empirical results show that the share of China in a country’s total imports has a robust positive effect on growth. Finally, the evidence suggests that there is an inverted-U relationship between exports to developed countries and growth in Africa. Overall, the results seem to provide support for the hypothesis of growth by destination (i.e., that where a country exports matters for the exporting country’s growth and development). I draw on these findings to outline some policy implications. JEL classification: F1, F41, O2, O4 This paper is a part of an ongoing research on the contribution of trade to long-term growth and development. A more extensive study titled “development by destination versus development by origin: theory and evidence on how trade may determine development patterns” is in

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