Exports diversification and knowledge sharing from south-south and south-north economic cooperation: evidence from the Central and West Africa

Ndambendia, Houdou (2014): Exports diversification and knowledge sharing from south-south and south-north economic cooperation: evidence from the Central and West Africa.

Abstract

In this paper, we address the issue of knowledge sharing from FDI inflows and imports from the north and south on exports diversification of selected African economies. Applying Generalized Method of Moments (GMM) and Random-Effects Probit with control of endogeneity, we find that FDI inflows and imports from the north and the south affect differently horizontal and vertical exports diversification. Indeed, FDI inflows have the strongest effect on vertical diversification whereas imports impact strongly horizontal export diversification. Moreover, imports from the south have the strongest impact on horizontal exports diversification whereas only FDI from the north significantly affect exports diversification irrespective of its nature. In addition, we find no evidence of knowledge sharing through education, meaning that lack of education significantly reduces the marginal effects of FDI inflows and imports on exports diversification. However, taking knowledge separately, we find that higher education is required to vertically diversify an economy. As policy recommendation, further human capital investment and set up of incentive mechanisms to attract FDI are needed to truly diversify economies of selected countries.

• Item Type: MPRA Paper
• Language: English
• Keywords: exports diversification, knowledge, FDI, imports, endogeneity
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C23 - Panel Data Models ; Spatio-temporal Models; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C26 - Instrumental Variables (IV) Estimation; F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade; I - Health, Education, and Welfare > I2 - Education and Research Institutions > I25 - Education and Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O55 - Africa

References

Agosin, M., R., Alvarez, R. and Bravo-Ortega (2012). “Determinants of export diversification around the world: 1962-2000”, the World Economy, vol. 35, Issue 3

Alemu, A. (2008). “Determinants of vertical and horizontal export diversification: evidence from Sub-Saharan Africa and East Asia”, Ethiopian Journal of Economics, vol. 17, No 2

Arellano, M., and Bond, S. (1991). “Some tests of specification for panel data: Monte Carlo evidence and application to employment equations”. Review of Economic Studies, 58,pp. 227–297.

Amighini, A. and Sanfilippo, M. (2014). “Impact of South–South FDI and Trade on the Export Upgrading of African Economies”, World Development Vol. 64, pp. 1–17

Banga, R. (2006). “The export-diversifying impact of Japanese and US foreign direct investments in the Indian manufacturing sector”, Journal of International Studies, 37, pp. 558-568

Beata S. Javorcik (2008). “Can Survey Evidence Shed Light on Spillovers from Foreign Direct Investment?”, The World Bank Research Observer, vol. 23, no. 2

Blundell, R. W., and Bond, S. R. (1998). “Initial conditions and moment restrictions in dynamic panel data model”. Journal of Econometrics, 87, pp. 115–143.

Collier, P. (2006). “African growth: why a ‘big push’?”, Journal of African Economies, vol. 15, Issue 2, PP. 188-211

Das, G., G.(2012). “Globalization, socio-institutional factors and North–South knowledge diffusion: Role of India and China as Southern growth progenitors”, Technological Forecasting and Social Change 79 pp. 620–637

DIERK HERZER* and FELICITAS NOWAK-LEHMANN D (2005). “What does export diversification do for growth? An econometric Analysis”, Ibero-America Institute for Economic Research, University of Goettingen, Platz der Goettinger Sieben 3, 37073 Goettingen, Germany

Giovannetti, G. and Sanfilippo, M. (2009). “Do Chinese exports crowd-out African goods? An econometric analysis by country and sector”, European Journal of Development Research, vol. 21, 4, pp. 506-530

Hammouda, B.,H., Karingi, S. N., Njuguna, A. E., and Sadni-Jallab, M. (2006). Diversification: Towards a new paradigm for Africa’s development. Africa Trade Policy Centre Work in Progress N. 35. Addis Ababa: UNECA.

Harding, T. and Javorcik, B., S. (2012). “Foreign direct investment and export upgrading?” The Review of Economics and Statistics, 94(4), pp.964–980

HE, Y. (2013). “Does China's trade expansion help African development? —an empirical estimation”, China Economic Review 26 (2013) pp. 28–38

Iwamoto, M. & Nabeshima, K. (2012). “Can FDI promote export diversification and sophistication of host countries? Dynamic panel system GMM analysis”, IDE Discussion Paper N. 347. Chiba: IDE/JETRO.

Javorcik, Beata S.; Spatareanu, Mariana (2009). “Tough Love: Do Czech Suppliers Learn from Their Relationships with Multinationals?”, LICOS Discussion Paper, No.249

Johnson, S., Ostry, J., D. Subramanian, A. (2007). “The prospects for sustained growth in africa: benchmarking the constraints”, NBER Working Paper 13120

Klinger, B. and Lederman, D. (2011) “Export discoveries, diversification and barriers to entry”, Economic Systems 35 pp. 64–83

Mayer, J. (1996). “implications of new trade and endogenous growth theories for diversification policies of commodity-dependent countries”, UNCTAD

Naudé, W., Bosker, M. and Matthee, M. (2010). “Export specialization and local economic growth”, World Economy, vol. 33, Issue 4, PP. 552-572

Naudé, W. and Rossouw, R. (2011). “Export diversification and economic performance: evidence from Brazil, China, India and South Africa”, volume 44, PP. 99-134

Omgba, L.D. Institutional foundations of export diversification patterns in oil-producing countries. Journal of Comparative Economics (2014), http://dx.doi.org/10.1016/j.jce.2014.02.001

Osakwe, P. N. (2007). Foreign aid, resources and export diversification in Africa: A new test of existing theories. Africa Trade Policy Centre Working Paper N. 61. Economic Commission for Africa

Page, J. (2012). “can Africa industrialise?”, Journal of African Economies, volume 21, Issue 2, PP. 86-124

Parteka A.and Tamberi M. (2011). “Export Diversification and Development: an Empirical Assessment”. Universita' Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali. Quaderni di Ricerca no 359

Parteka, A. and Tamberi M. (2013). “Product diversification, relative specialisation and economic development: Import–export analysis”, Journal of Macroeconomics 38, 121–135

Roodman, D. (2009). “practitioners’ corner a note on the theme of Too Many Instruments”, Oxford Bulletin of Economics and Statistics, 71, 1 (2009)

Roodman, D. (2009). “How to do xtabond2: An introduction to difference and system GMM in Stata”. Stata Journal, 9(1), pp. 86-136.

SALAS, V., B. (2014). “International Remittances and Human Capital Formation”, World Development Vol. 59, pp. 224–237

Sheridan, B.J.(2014). “Manufacturing exports and growth: When is a developing country ready to transition from primary exports to manufacturing exports?”, Journal of Macroeconomics (2014), doi: http:// dx.doi.org/10.1016/j.jmacro.2014.06.002

Timothy G. Taylor (2007); “Export diversification in Latin America and the Caribbean”, The Journal of the Caribbean Agro-Economic Society (CAES),. 7 (1) pp. 157-175

UNCTAD, (2013b), Handbook of Statistics, (Geneva: United Nations).

Vella, F. and Verbeek, M (1999). “Two-step estimation of panel data models with censored endogenous variables and selection bias”, Journal of Econometrics, 90, pp. 239Ð263