The Impact of Institutional Quality on Intra-African Trade : Evidence from sub-Saharan African Countries

This paper examines the effects of governance quality on intra-African trade in primaryand manufactured goods. We use a gravity model with panel data from 1996 to 2019 in 48sub-Saharan African countries and the World Bank’s World Governance Indicators (WGI). Ourresults suggest that average institutional quality has significantly positive effects on exports ofmanufactured and primary products with more pronounced impacts in the manufacturingsector. The analysis of the disaggregated indices shows positive and significant effects ofall six indices on exports of manufactured and primary goods. Furthermore, we find thatbetter institutions have a stronger impact on the probability of trade in manufacturing goods.Several sensitivity tests confirm the robustness of our results. To establish a promising Africancontinental free trade area (AfCFTA), sub-Saharan African countries need to devise a stronginstitutional framework to facilitate transparency and security to boost intra-African trade