Effects of trade openness on industrialization in West African countries: the role of institutional quality and financial development
- Cogent Economics and Finance , 13
Résumé
Abstract This research analyses the effects of trade opening on industrialization in West African countries. It focuses on a panel of fourteen (14) West African countries and covers the period from 2002 to 2022. The estimation methods used in this article are Two-Stage Least Squares (2SLS), Fixed-effects IV regression, and Lewbel instrumental variables approach. The results show that trade openness is favourable to industrial development in West African countries. This favourable effect improves with institutional quality, in particular, political stability, the rule of law, and regulatory quality. On the other hand, it deteriorates with financial development. This result encourages the authorities in West African countries to diversify the range of products available for export on the international market. To accelerate the industrialization process in the community, governments should improve the quality of their institutions and promote financial development through negotiations with financial stakeholders to reduce interest rates and create specific investment funds for industrial activities. Impact statement Trade liberalization, an integral part of globalization, continues to be important in the economies of countries, especially developing ones. It has a clear but controversial impact on the industrialization of countries. This research analyzes the effects of trade liberalization on industrialization by highlighting institutional quality and financial development in West African countries.
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