The Role of Foreign Trade in Economic Growth and Individual Heterogeneity Problem in Panel Data: The Case of African Countries

In this work we proposed to analyze the problem of individual heterogeneity in panel data and implement resolution to verify the role of foreign trade on economic growth in Sub-Saharan Africa. The purpose was to verify improvement in terms of specification and estimation of economic growth model, linked to the consideration or not of individual heterogeneity. To achieve this we have used two models, one taking into account the individual heterogeneity and the other not, to estimate and compare their result. From this comparison, it appears that taking into account individual heterogeneity improves the quality of the model. This implies that the same economic policy may lead to different results in different countries. Thus, it is desirable that economic policy decision for several countries must consider their individual characteristics before implementation. However, the study reveals a positive impact of foreign trade on Sub-Saharan Africa countries economic growth. This paper provides warning signs to African continental integration by highlighting countries heterogeneity and policy coordination issue.