Openness, Growth and Convergence in Africa: Evidence from 1980-1999 Data

We explore the effects of openness to trade on growth and the implications for income convergence in Africa. Fixed-effect estimation results indicate that the evidence on the direct impact of openness to trade on growth is mixed and there is no support for conditional convergence. On the other hand, we find that the joint effect of openness and initial income has a U shape, suggesting that greater openness to trade may enhance growth in countries with relatively high income but tends to depress it in lower-income countries. Furthermore, we show that the growth effects of openness to trade also depend on export diversification. Our results suggest that openness to trade has a negative effect on growth in countries with high export concentration. An important policy implication of our findings is that liberalization and reform programs aimed at boosting openness to trade should take into account these interactions, otherwise low-income economies which also tend to have low export diversification could be harmed by trade liberalization.