INTRA-REGIONAL TRADE IN AFRICA AND THE IMPACT OF CHINESE INTERVENTION: A GRAVITY MODEL APPROACH

Pooja Khosla ()
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Pooja Khosla: University of Oxford, United Kingdom

Journal of Economic Development, 2015, vol. 40, issue 4, 41-66

Abstract: China's trade with Africa has increased significantly in the past two decades. The effects of these growing trade volumes (and financial flows) are quite contested. The purpose of this paper is to study the effects of growing Chinese influence in Africa on the intra-regional trade in the continent. This paper estimates a traditional gravity model using Poisson pseudo-maximum-likelihood estimation method for a panel of 135 countries over the period 1990-2012. The results show that African countries are marginalized from world trade. They trade less, compared to a non-African country with similar characteristics. Even though intra-regional trade in Africa is quite low, this paper finds no evidence that these trade volumes are lower than what would be expected (given the characteristics of these countries). However, the results indicate that trade relations with China have distorted patterns of trade in Africa. The analysis shows that Chinese presence has led African countries to import less from (and export less to) other African countries. The massive influx of cheap Chinese goods into African markets combined with preferential tariff treatment offered by the Chinese government to African exporters may explain these patterns. This study also looks at how the effects of Chinese engagement in Africa have changed over time. The results suggest that over the past decade, the effects of China on intra-regional trade have become less negative. Since the late 1990's, Chinese investment in infrastructure, capacity building combined with high volumes of aid have helped African countries overcome some of the infrastructural bottlenecks and could explain the relatively higher intra-regional trade in the post-2000 period.

Keywords: Gravity Model; Trade; Africa; China (search for similar items in EconPapers)
JEL-codes: F14 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (5)

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