The effect of integration processes of the Common Market for Eastern and Southern Africa on the economic growth of the member states

Abstract

AbstractThis study aims to identify the significant effects of the Common Market for Eastern and Southern Africa (COMESA) integration processes on the economic growth of the member states over the period 2004–2016. By applying the system generalized method of moments (GMM) technique, the results show that the gross domestic product (GDP) per capita, with a 1‐year lag, has a robust effect on economic growth. Both per capita domestic value‐added (PCDVA) and institutional quality (IQ) exhibit a positive impact on economic growth in the long‐run performance compared to the short‐run performance. Human capital (HC) suggests statistical significance and adverse impact on economic growth in the short and long runs. However, our key variable of interest, namely the regional integration dummy variable (free trade area, FTA), has no robust effect on economic growth and exhibits insignificant effects across all interaction models and shows “inverted‐U interaction relationships” with trade openness, intra‐community export, and PCDVA. Other regional economic communities shows a statistically significant negative effect on the GDP per capita in both the short and long runs as well as in its interactions with FTA. The study suggests, among others, that there is a need for COMESA to address the issue of overlapping membership and to promote appropriate PCDVA, IQ, financial development, and HC policies and strategies to boost the economic growth of the member states.