The Impact of Trade Integration on Poverty Reduction in ECOWAS
Downloads
This paper examines the impact of trade integration on poverty reduction in the Economic Community of West African States (ECOWAS). To investigate the impact of trade integration on poverty reduction, data for all fifteen member countries of ECOWAS on the number of poor people, bilateral trade, trade openness, exchange rate, foreign direct investment, interest rate, inflation rate, and import tariff were collected from the World Bank, WTO, IMF and WDIs from 2010 to 2019. After various tests, heteroscedasticity was found to be present. Therefore, to address this problem, the Feasible Generalized Least Squares (FGLS) method was used to examine the aforementioned impacts. The results showed that trade openness, bilateral trade, exchange rate, and import duties significantly impact poverty. The results indicated that trade integration is significant in reducing poverty within ECOWAS. The study recommends measures to enhance the effectiveness of trade integration as it has an important impact on reducing poverty in the region. First, ECOWAS should implement policies to support smaller countries in improving their productive capacities to compete effectively within the region. Secondly, harmonization of exchange rates by creating a common currency would facilitate smoother trade flows and contribute to poverty reduction. Member countries should prioritize trade with other ECOWAS nations, implement policies to ensure that foreign investments benefit the local economies, and focus on exporting finished goods rather than raw materials to create employment opportunities and support poverty reduction efforts.
Abadie, A., Athey, S., Imbens, G. W., & Wooldridge, J. M. (2022). When Should You Adjust Standard Errors for Clustering? The Quarterly Journal of Economics, 138(1), 1-35.
Adedokun, A. S., Yameogo, C. E., & Osode, O. E. (2020). International Financial Integration, Macroeconomic Performance and Poverty Reduction in WAMZ Countries. Journal of Economic Studies (JES), 17(1), 1-14.
Aikins, R. E., & McLachl, D. T. (2022, July 13). The continent will probably miss the SDG poverty target, but the right policies could deliver significant reductions. Institute for Security Studies. https://issafrica.org/iss-today/africa-is-losing-the-battle-against-extreme-poverty
Ametoglo, M. E., Guo, P., & Wonyra, K. O. (2018). Regional Integration and Income Inequality in ECOWAS Zone. Journal of Economic Integration, 33(3), 604 - 628.
ARII. (2019). Africa Regional Integration Index (ARII). Addis- Ababa: African Union Commission (AUC), the African Development Bank (AfDB) and the Economic Commission for Africa (ECA).
Bacrot, C., & Valensisi, G. (2019, September 24). Harnessing trade facilitation for regional integration. UNCTAD. https://unctad.org/news/harnessing-trade-facilitation-regional-integration
Bakari, I. H., Donga, M., Idi, A., Hedima, J. E., Wilson, K., Babayo, H., & Ibrahim, Y. (2019). An examination of the Impact of Financial Inclusion onPoverty Reduction: An Empirical Evidence from Sub-Saharan Africa. International Journal of Scientific and Research, 9(1), 239-252.
Balassa, B. (1961). Towards a Theory of Economic Integration. Kyklos, 14(1), 1-17. https://doi.org/10.1111/j.1467-6435.1961.tb02365.x
Baldwin, R. E., & Venables, A. J. (1995). Regional economic integration. . In G. M. Grossman, & K. Rogoff, (eds) Handbook of International Economics (pp. Vol. 3, pp. 1597-1644). Amsterdam: Elsevier. https://doi.org/10.1016/S1573-4404(05)80011-5.
Bartley, J. M., Brenton, P., Cali, M., Hoppe, M., & Piermartini, R. (2015). The role of trade in ending poverty (English). Washington, D.C.: World Bank
Bertrand, M., Duflo, E., & Mullainathan, S. (2004). How much should we trust differences-in-differences estimates? The Quarterly Journal of Economics, 119(1), 249–275.
Bisiriyu , S. O., Oresanwo, A. M., Feyisina, D. O., & Nyishagba, C. S. (2021). Trade Integration and Economic Growth in Nigeria. Bells University of Technology Journal of Mangement Sciences, 1(2) 33-42.
Bui, A. T., Dungey, M., Nguyen, C. V., & Pham, T. P. (2016). Impacts of Economic Integration on Living Standards and Poverty Reduction of Rural Households (MPRA Paper No. 71129).
DFID. (2008). Growth - Building Jobs and Prosperity in Developing Countries. UK: Department for International Development.
ECOWAS. (2023a). Trade Policy. Economic Community of West African States. https://ecotis.projects.ecowas.int/policy-development/common-market-and-custom-union/#:~:text=Trade%20Policy,-
ECOWAS%20Trade%20Liberalization&text=The%20objective%20of%20the%20ETLS,area%20at%20the%20community%20level.
ECOWAS. (2023b). ECOWAS Common External Tariff (CET). ECOWAS Trade Information System (ECOTIS). https://ecotis.ecowas.int/policy-development/common-external-tariff-cet/#:~:text=CET%20is%20the%20application%20of,first%20entry%20of%20the%20goods.
Feenstra, R. (2003). Advanced International Trade: Theory and Evidence. Princeton: Princeton University Press.
Gammadigbe, V. (2021). Trade Integration in West Africa: Does the Quality of Institutions Matter. Journal of African Trade 8(1), 65–81..
Gasiorek, M., & Martuscelli, A. (2017). The impact of regional integration on poverty in developing countries: what do we know and what have we learnt? (ECDPM Discussion Paper).
Guerineau, S. (2016). Integration and Poverty Reduction. in Kireyev, A. P. (ed.). In Building Integrated Economies in West Africa (pp. 357–372). USA: International Monetary Fund. https://doi.org/10.5089/9781513511832.071.ch028
Gujarati, D. N. (2004). Basic Econometrics (4th ed.). New York: McGraw-Hill Companies.
Hansen, B. E. (2019). Econometrics. Wisconsin: Department of Economics, University of Wisconsin.
Hausman, J. A. (1978). Specification Tests in Econometrics. Econometrica, 46(6), 1251–1271.
Ilyas, A., Banaras, A., Javaid, Z., & Rahman, S. (2023). Effect of Foreign Direct Investment and Trade Openness on the Poverty Alleviation in Burundi – Sub African Country: ARDL (Co-integration) Approach. Pakistan Journal of Humanities and Social Sciences, 11(1), 555–565.
Khatiwada, Y. R. (2005). Linkage between Trade, Development and Poverty Reduction: A Study on Short Term Impact of Trade Liberalization on Poverty in Nepal. Kathmandu: South Asia Watch on Trade, Economics and Environment.
Krishna, P., & Arvind, P. (2002). On Necessarily Welfare-Enhancing Free Trade Areas. Journal of International Economics, 57(2), 353-367.
Linder, S. B. (1961). An Essay on Trade and Transformation. New York: Wiley and Sons.
Mealy, M. (2005). Linkages between Trade, Development and Poverty Reduction: Stakeholders’ Views from Asia on Pro-poor Trade Policies. CUTS - Centre for International Trade, Economics & Environment (CITEE).
Ndukwe, F. O. (2004). Promoting Trade: Regional Integration and the Global Economy. In S. M. Nsouli, New Partnership for Africa’s Development (pp. 88–115). USA: International Monetary Fund. https://doi.org/10.5089/9781589062627.072.ch0006
Nega, F., Ageba, G., & Seid, E. H. (2021). Regional Integration and Poverty Reduction in the Horn of Africa: The AfCFTA Perspective. Addis Ababa: Friedrich Ebert Stiftung.
Niekerk, L. K. V. (2005). Regional integration: Concepts, advantages, disadvantages and lessons of experience. South Africa: World Bank country Office.
Nshimbi, C. C. (2018). Issues in African Informality: What is the Relevance for Regional or Continental Integration? Africa Insight, 48(1), 41-61.
ODI. (2005). Regional Integration and Poverty (ODI Briefing Paper). Available at https://www.odi.org/sites/odi.org.uk/files/odi-assets/publications-opinionfiles/2600.pdf
OECD. (2009). Trading Out of Poverty: How aid for trade can help. OECD Journal on Development.
Onakoya, A., Johnson, B., & Ogundajo, G. (2019). Poverty and trade liberalization: empirical evidence from 21 African countries. Economic Research-Ekonomska Istraživanja, 32(1), 635-656, DOI: 10.1080/1331677X.2018.1561320.
Onyekwena, C., & Oloko, T. F. (2016). Regional Trade for Inclusive Development in West Africa. Abuja: Centre for the Study of Economies of Africa (CSEA).
Oslington, P. (2013). Contextual History, Practitioner History and Classic Status: Reading Jacob Viner’s The Customs Union Issue. Australian Catholic University, Journal of the History of Economic Thought, 1-32.
Ozigbu, J. C. (2023). Trade Integration and Economic Well-Being: Evidence from Generalised Methods of Moments (Gmm) in the D-8 Countries. African Journal of Economics and Sustainable Development, 6(2), Issues, 64-75.
Park, C.-Y., & Claveria, R. (2018). Does Regional Integration Matter for Inclusive Growth? Evidence from the Multidimensional Regional Integration Index. (ADB Economics Working Paper Series No. 559).
Rodriguez, F., & Rodrik, D. (2001). Trade Policy and Economic Growth: A Skeptic’s Guide toThe Gross-National Evidence. B. Bernanke and K.S.Rogoff (eds), Macroeconomics Annual 2000, Cambridge: MIT Press for NBER.
Schislyaeva, E. R., & Saychenko, O. A. (2022). Evaluation of post COVID-19 energy poverty and global trading impact on energy affordability. Frontiers in Energy Research, 10, 971122. https://doi.org/10.3389/fenrg.2022.971122
Sheytanova, T. (2015). The Accuracy of the Hausman Test in Panel Data [Master’s thesis, Örebro University School of Business].
Sukoco, S., Hartono, D., & Patunru, A. A. (2020). The impacts of liberalization and trade facilitation on economicperformance, poverty and income inequality: An analytical study. Economic Journal of Emerging Markets, 12(1), 67-79.
Tralac. (2023, June 02). Status of AfCFTA Ratification. Tralac. https://www.tralac.org/resources/infographic/13795-status-of-afcfta-ratification.html#:~:text=Ghana%2C%20Kenya%2C%20Rwanda%2C%20Niger,Guinea%2C%20Gabon%2C%20Mauritius%2C%20Central
Uexkull, E. V. (2012). Regional Trade and Employment in ECOWAS. In OECD, Policy Priorities for International Trade and Jobs (pp. 415-446). Organisation for Economic Co-operation and Development (OECD).
Umeh, A. C., Nwali , S. O., & Obi, A. N. (2021). Impact of International Trade on Poverty Reduction in Nigeria: An Approach of Time Series Econometric Model. Himalayan Economics and Business Management, 24-36.
UN. (2022, January 20). West Africa: Extreme poverty rises nearly 3 per cent due to COVID-19. United Nations. https://news.un.org/en/story/2022/01/1110192
United Nations. (2022, June 8). Poverty Eradication. Retrieved from United Nations. https://www.un.org/development/desa/socialperspectiveondevelopment/issues/poverty-eradication.html
Viner, J. (1950). The Customs Union Issue. New York: Carnegie Endowment for International Peace.
Winters, L. A., McCulloch, N., & McKay, A. (2004). Trade Liberalization and Poverty: The Evidence so Far. Journal of Economic Literature, 42(1): 72–115.
Wooldridge, J. M. (2012). Introductory Econometrics: A modern Approach. Mason, Ohio: South-Western Cengage Learning.
World Bank. (2023a). GDP per capita, PPP (current international $) - Africa. The World Bank. https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?locations=A9
World Bank. (2023b). New World Bank country classifications by income level: 2022-2023. The World Bank. https://blogs.worldbank.org/opendata/new-world-bank-country-classifications-income-level-2022-2023
World Bank. (2023c). Poverty and Inequality. The World Bank. https://datatopics.worldbank.org/world-development-indicators/themes/poverty-and-inequality.html
Yameogo, C. E., & Omojolaibi, J. A. (2022). Regional Economic Integration and its Impact on Income Distribution and the Poverty Level: The Case of the WAEMU Zone. Quaestiones Geographicae, 41(2), 21–35.
Yameogo, C. W., & Omojolaibi, J. A. (2021). Trade liberalisation, economic growth and poverty level in sub-Saharan Africa (SSA). Economic Research-Ekonomska Istraživanja, 34(1), 754-774, https://doi.org/10.1080/1331677X.2020.1804428
Copyright (c) 2024 Akinyemi Christopher Afolabi, Dickson Thomas Ndamsa
This work is licensed under a Creative Commons Attribution 4.0 International License.
JDE (Journal of Developing Economies) (p-ISSN: 2541-1012; e-ISSN: 2528-2018) is licensed under a Creative Commons Attribution 4.0 International License
- The journal allows the author to hold the copyright of the article without restrictions.
- The journal allows the author(s) to retain publishing rights without restrictions
- The legal formal aspect of journal publication accessibility refers to Creative Commons Attribution (CC BY)
