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The analysis of borders effects in intra-African trade

The study aims to analyze the border effects on intra-African trade through the use of a gravity specifi cation based on the monopolistic competition model of trade introduced by Krugman (1980). The study used CEPII data on trade flows between African countries over the period 1980-2006. We accommodate for the signifi cant number of zero trade flows between several African countries by using the Heckman correction method. The findings suggest that while the extent of market fragmentation is on average very high within the African continent, the border effects within SADC and ECOWAS are more in line with other international estimations. Whereas results indicate that border effects faced by intra-African trade are quite substantial: on average an African country trade 108 times more “with itself” than with another country on the continent. Border effects in SADC and ECOWAS are respectively about 5 and 3 times lower. The inclusion of the infrastructure indices contributes signifi cantly to this result. Considering infrastructure is actually an interesting way to capture the effect of distribution networks which represent, along with imperfect information and localized tastes, relevant but generally omitted sources of resistance.
Working paper 701
1 August 2017
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