Revisiting the Effectiveness of African Economic Integration. A Meta-Analytic Review and Comparative Estimation Methods
- 28 October 2013
- 16:45 – 18:45 Concurrent Seminars
- Session 1.3 Regional Integration and Economic Growth
- Sylvanus Kwaku Afesorgbor
Two main shortcomings characterize the estimation of gravity model in previous studies that focus on the effectiveness of African RTAs. Firstly, these studies failed to account for multilateral resistance term. The omission of the MRT contributes to biased estimates for standard variables in the gravity model. Secondly, there is a significant proportion of zero flows in developing countries trade measurement, however, these studies fail to account for them properly. The percentage of zero flows in African bilateral trade is over 50%. In an attempt to correct this anomaly, previous studies relied on the Tobit model or replacing zero flows with small values. However these strategies have been labeled as infeasible and producing inconsistent parameters. In this study, we conduct a meta-analysis of previous empirical studies and compare the estimation methods of previous studies to Poisson Pseudo Maximum Likelihood. Using panel data on trade flows from 1980 to 2006 for 47 African countries, we assess the effectiveness of five major RTAs in Africa. We find that although there is general positive impact of African RTAs, impacts are highly sensitive to different estimation methods and impact tends to be significantly overestimated when zero flows are not properly dealt with. Comparative assessment of the five major RTAs indicates uneven performance.