Munich Personal RePEc Archive

Are African exports that weak ? A trade in value-added approach

NJIKE, ARNOLD (2019): Are African exports that weak ? A trade in value-added approach.

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Abstract

African countries are known to export less than any other group of countries in the world. Numerous studies have pointed out the high level of transport costs related to the lousy quality of transport infrastructures in the African continent to be the main explanation of this situation. We first show that depending on the estimator used, African countries on aggregate do not trade necessary less than the average country in the world when it comes to gross exports, even if they underperform clearly as regards final goods exports. We also formulate a model for trade in value-added by adapting the Anderson and Van Wincoop’s gravity equation to take into account the structure of value-added exports. The proposed model highlights the importance of indirect trade costs, which are trade costs of third countries through which the exported value-added of the origin country passes to reach its final destination. When we control for these indirect trade costs, it appears that the penalty on the direct trade costs between African countries’ and their partners is at least two times lower for value-added exports than what is predicted for gross exports and even six times lower in comparison to final goods exports.

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