![]() Democracy may therefore play a role in strengthening intra-Africa trade by improving the financial sector. It accords with the finding from Beck ( 2002, 2003) that the share of exports in industries that use more external finance is higher in countries with better developed-financial systems. Footnote 2 This, in turn, favors bilateral trade by enabling countries take advantage of technology transfer and specialization, address firms’ liquidity constraints, increase the level of physical capital, and exploit economies of scale. 2020) and alleviating credit constraints (Osei-Tutu and Weill 2022) for firms. First, democracy promotes the development of financial systems particularly for less-developed countries (Huang 2010), by reducing the cost of credit (Delis et al. Theoretically, there are three main contributing factors to democracy fostering intra-Africa trade. 572), we consider democracy as the overall “institutional umbrella that primarily encompasses changes in constitutional characteristics of democracy, such as a system of free elections, the evolution of checks and balances by independent political bodies, and the evolution of civil liberties.” We expect that the changes in these democratic characteristics may influence intra-Africa trade of goods. In this paper, we question whether democracy contributes to foster intra-African trade of goods. Except Guinea (rated as “Partly Free”), Freedom House classifies all the remaining countries as autocratic states, with political rights and civil liberties ratings of “Not Free.” Footnote 1 For instance, the top four countries with the least share of intra‐Africa exports in total exports between 20 are Chad with 0.2%, Guinea with 1.6%, Eritrea with 2.3%, and Equatorial Guinea with 3.5% (UNCTAD 2019a). Moreover, a closer look at the data reveals important cross-country differences. Indeed, studies predict that democratic regimes are associated with lower transaction costs in exchanges and formulate trade policies that maximize preferences of the median voter (Mayer 1984 Decker and Lim 2009 Yu 2010). These findings raise questions about the role of political regimes in facilitating intra-Africa trade. ![]() ![]() The consensus broadly centers around three main issues: ineffective government policies and political instability, infrastructural weaknesses, and geography costs. The fact that Africa trades considerably less among itself is a key issue among policymakers as it obstructs the potential for deep regional integration and hampers economic development opportunities for Africa.Ī large strand of the literature has therefore investigated the factors that account for the low trade among African countries (e.g., Fosu 2003 Longo and Sekkat 2004 Geda and Kebret 2008 De Melo and Tsikata, 2015 Hoekman and Senbet, 2017). Compared to intra-regional trade over the same period in other parts of the world, such as the 47% in America, 61% in Asia, and 67% in Europe, the level of Africa’s internal trade is extremely low (UNCTAD 2019a). From 2015 to 2017, for example, the average of trade among African countries accounted for just 15.2% of the continents’ total trade (UNCTAD 2019a). Unfortunately, however, intra-Africa trade remains abysmal. It contributes to the creation of jobs, guards against external macroeconomic shocks (e.g., disruption in international supply chains induced by the COVID-19 pandemic), enhances the exploitation of regional economies of scale, and increases the survival of African export flows (UNDP 2011 Kamuganga 2012 Anyanwu 2014). Fostering intra-Africa trade is pivotal for accelerating sustainable growth across the continent.
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