Africa as headwaiter at the dining table of global value chains: Do institutions matter for her participation?

Abstract

Global value chains (GVC) have propelled substantial expansion in international trade across the globe over the last two decades. Yet, the institution-GVC nexus in Africa suffers complete neglect in literature. Therefore, we evaluate the impact of different components of political and economic institutions on backward (BWDGVC), forward (FWDGVC), total GVC participation, and GVC position (upstreamness) in Africa. Using system-GMM with United Nations Conference on Trade and Development GVC database (UNCTAD-Eora MRIO) for 47 African countries over the period 2000-2018, the key findings show that the effects of the political and economic institutions on GVC participation are diverse. Specifically, property rights, government spending, monetary freedom, and tax burden negatively affect BWDGVC participation while government integrity, investment freedom, and financial freedom stimulate the BWDGVC. Also, all the components of institutional quality that propel BWDGVC, hinder FWDGVC participation and upstreamness, except investment freedom which promotes both BWDGVC and FWDGVC. Nonetheless, property rights, government integrity, monetary freedom, financial freedom, and tax burden engender total GVC participation, whereas government effectiveness, and investment freedom hinder the total GVC participation. Furthermore, good political institutions promote BWGVC and total GVC but reduce upstreamness. Thus, institutions are fundamental drivers of GVC participation in Africa.

Effects of economic freedom and ease of doing business on trade in global value chains: Evidence from sub‐Saharan Africa

“…These findings reinforce findings by Cook and Patel (2023) who document a strong relationship between monetary policy, exchange rates, and international trade flows. The finding also supports Alhassan et al (2021) who argue that institutions matter for Africa's participation in GVCs.…”

“…In a similar manner, Okah Efogo (2020) investigates association between trade in services and Africa's involvement in GVCs, while Abdul-Rahaman and Abdulai (2020) analyze the affiliation between social networks, participation in the rice value chain, and market performance in Ghana. Additionally, a study by Alhassan et al (2021) investigates the possibility that African participation in GVCs is influenced by institutions.…”

An analysis of value chain trade in Africa

“…African countries are one such case whereby their participation in GVC is not well documented compared with developed countries (Alhassan et al., 2021; Van Biesebroeck & Mensah, 2019). Further, it is not clear how the GVC participation level is sensitive to the databases employed.…”

Effet global du genre dans le développement des chaînes de valeur mondiales dans le contexte africain

“…La littérature récente montre l'importance non seulement de l'intensité de la participation aux chaînes de valeur mondiales (CVM), mais aussi de la position au sein de la CVM (Banque mondiale et Organisation mondiale du commerce, 2019; Alhassan et al, 2021; Acemoglu et al, 2016; Harrison & McMillan, 2011; ‘Ofa & Karingi, 2014) ou les salaires (Baumgarten et al, 2013; Ebenstein et al, 2014; Geishecker & Görg, 2013; Hummels et al, 2014; Wolszczak‐Derlacz & Parteka, 2018). Aussi, les questions de libéralisation du commerce, de mondialisation, et d'avancées technologiques se sont‐elles traduites par des changements importants dans les systèmes agricoles et alimentaires.…”