Is trade openness a barrier to industrialization? Evidence from Sub-Saharan Africa

Gislain Stéphane Gandjon Fankem () and Cédric Feyom ()
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Gislain Stéphane Gandjon Fankem: University of Yaoundé II
Cédric Feyom: University of Ngaoundéré

Review of World Economics (Weltwirtschaftliches Archiv), 2024, vol. 160, issue 2, No 14, 713-759

Abstract: Abstract The literature on the effect of trade openness on industrialization shows contrasting results. Using a new empirical framework, we contribute in this paper to the removal of this indeterminacy by studying the influence of trade openness on industrialization in a sample of Sub-Saharan African countries. We use the new measure of trade openness and approximate industrialization through three complementary indicators: manufacturing value-added as a percentage of GDP, manufacturing employment as a share of total employment, and the industrial competitiveness index. Estimations are carried out by a two-step system generalized method of moments (GMM). Over the period 1985–2014, our results show that in Sub-Saharan Africa, the level of industrialization is a decreasing function of trade openness. The magnitude of this negative effect is conditioned by very low levels of foreign direct investment and human capital. Our results, which stand up to many robustness checks, seem to support the implications of the infant industry argument.

Keywords: Trade openness; Industrialization; Sub-Saharan Africa (search for similar items in EconPapers)
JEL-codes: F13 O14 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10290-023-00497-2

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