The Role of Regional Trade Integration and Governance in Structural Transformation: Evidence from ECOWAS Trade Bloc

Abstract

This chapter examines the effect of regional trade integration and governance on structural transformation in the ECOWAS trade bloc during 2000–2015, using the methodology for calculating the Africa Regional Integration Index (ARII) developed jointly by African Union Commission (AUC), the African Development Bank (AfDB) and the Economic Commission for Africa (ECA) to estimate the relevant regional trade index. The results of panel regression show that poor governance negatively affects structural transformation while openness of member states’ economies to both intra-regional trade and the rest of the world promote positive transformation towards the industrial sector. Trade integration alone as measured by its index, TINT, records neither positive nor negative statistically significant effect on any of the measures of structural transformation. Therefore, ECOWAS countries require both intra-regional and international trade with the rest of the world to structurally transform from the primary sector towards sustained industrialisation.