The Implications of HO and IRS Theories in Bilateral Trade Flows within Sub-Saharan Africa

Julie Lohi
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Julie Lohi: Department of Economics, West Virginia University, Morgantown, WV, USA

Global Economy Journal (GEJ), 2013, vol. 13, issue 2, 175-202

Abstract: Sub-Saharan African (SSA) countries tend to trade less among themselves. This article analyzes the driving forces of bilateral trades within the SSA region. To do so, I use the gravity equations from Evenett and Keller (2002) and study what trade theories, the Heckscher–Ohlin theory of factor abundance or the increasing return to scale theory of product differentiation, account for the bilateral trade flows within this region. My results indicate that trades within this region do not arise from factor abundance or product differentiation. Trade policies that are aimed to promote trade within the region (i.e. FTA, custom unions) are likely to fail, because SSA countries produce similar homogeneous products. The key factor for economic success from international trade for the SSA region relies on how to manufacture products in different varieties and how to export their comparative advantage goods outside the region.

Keywords: Sub-Saharan Africa; regional trade; gravity equation; Heckscher–Ohlin; increasing return to scale (IRS) (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1515/GEJ-2012-0020

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