Leveraging On Infrastructural Development Towards International Trade: Evidence from Sub-Saharan Africa

Abstract

Studies on infrastructure development and international trade abound in economic literature, both past and recent times, however, most studies focused on developed economies and those that studied Africa failed to delve into sub-Saharan Africa (SSA). This study re-examines the infrastructure development and international trade nexus in SSA by employing GMM, PMG, Hassen threshold estimator and PLS-SEM. The objective of the study is to examine how infrastructural development spurs international trade in SSA. Using 43 countries in SSA, with a panel data from 1985-2020 and a cross-sectional data for the year 2020, it was discovered that infrastructural development significantly promotes trade. Though the effects of port development on trade are highly significant, it depends largely on the measure of trade used but population however inhabits trade. Moreover, ICT positively impacted exports in the short and long run. Also, the service sector showed a positive impact in the short run through ICT, for export and a negative but highly significant impact through GFCF and port development for imports. With the threshold estimator, it revealed that GFCF on all the proxies of trade is U-shaped. That, it is economically prudent to operate below the threshold estimate for exports. Also, ICT and port development established a U-shape and an invented U-shape with export and import respectively. This means that depending on the objectives of the country, ICT, and port development spur trade. Regarding the mediating role, it was revealed that all institutional quality variables supported the hypothesis that institutional quality spurs international trade through infrastructure development in SSA. Therefore, it is recommended that emerging economies in SSA with a keen interest in improving trade must develop policies geared towards infrastructural development which has the potential of improving trade. Such policy(ies) could be a development plan which is aimed at improving infrastructure through digitalization, which all successive governments must be committed to. Furthermore, governments should prioritize developing the various sectors especially the service and agricultural sectors through ICT which spurs growth for developing economies.