Regional Disparities in the WAMZ: Integrating the Role of Market Potential and Structural Change

Abstract

This paper examined the disparities in terms of income within the WAMZ member countries over the period 1980–2013. The theoretical model is based on the extended version of the New Economy Geography (EGM) Model of growth where the initial per capita GDP growth, changing market access and other controlled variables were included considering structural changes and no structural changes. The major finding obtained from the estimations was the positive and significant relationship between initial per capita GDP and Per capita GDP growth which implies lack of conditional convergence for both periods of structural changes and no structural changes. This is attributable to the uneven slow growing pattern of member countries of the sub-region. Also, the changing market access variable showed negative but significant impact on growth mostly for period of structural changes. Hence with the declining pattern of market access which has the tendency to retard growth in the long run contrary to the short run increase in growth, the rich countries in the WAMZ may not benefit from such a declining trend but may make the poorer countries to catch up. A major policy implication here is to have greater access to market in the form of lowering tariff rates and/or costs to foster trade agreement within the sub-region. Effective trade relation capable of reducing barriers is needed to further strengthen its integration plans.