GROWTH BY DESTINATION (WHERE YOU EXPORT MATTERS): TRADE WITH CHINA AND GROWTH IN AFRICAN COUNTRIES

Growth by destination (where you export matters):
Trade with China and growth in African countries
Mina Baliamoune-Lutz
Professor and Kip Fellow of Economics
University of North Florida
And
Research Fellow, ICER (Italy )


Abstract

I perform Arellano-Bond GMM estimations using panel data over the period 1995-2008 and
explore the growth effects of Africa’s trade with China, distinguishing between the effect of
imports and the effect of exports, and controlling for the role of export concentration. Four
important results are obtained from the empirical analysis. First, there is no empirical
evidence that exports to China enhance growth unconditionally.

Second, the results suggest
that export concentration enhances the growth effects of exporting to China, implying that
countries which export one major commodity to China benefit more (in terms of growth)
than do countries that have more diversified exports. Third, contrary to the widely held view
that increasing imports from China would have a negative effect, the empirical results show
that the share of China in a country’s total imports has a robust positive effect on growth.
Finally, the evidence suggests that there is an inverted-U relationship between exports to
developed countries and growth in Africa.

Overall, the results seem to provide support for the
hypothesis of growth by destination (i.e., that where a country exports matters for the
exporting country’s growth and development) in the sense that exports to more developed
(OECD) countries has (at least up to a threshold) a positive impact on growth but no such
effect is unambiguously (unconditionally) shown in the case of exports to China. I draw on
these findings to outline some policy implications.

JEL classification: F1, F41, O2, O4

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