Economic Integration of Africa in the 21st Century: Complex Network and Panel Regression Analysis

TL;DR

This paper uses complex network analysis and panel regression to identify key economic and institutional factors influencing Africa's trade integration, highlighting the importance of connectivity and strategic agreements for economic growth.

Contribution

It introduces a combined complex network and panel regression approach to better understand Africa's economic integration dynamics, addressing limitations of traditional measures.

Findings

Economic development and institutional quality boost trade network position.

Trade costs and overlapping memberships hinder integration.

Key factors include FDI, infrastructure, and regional trade agreements.

Abstract

Global and regional integration has grown significantly in recent decades, boosting intra-African trade and positively impacting national economies through trade diversification and sustainable development. However, existing measures of economic integration often fail to capture the complex interactions among trading partners. This study addresses this gap by using complex network analysis and dynamic panel regression techniques to identify factors driving economic integration in Africa, based on data from 2002 to 2019. The results show that economic development, institutional quality, regional trade agreements, human capital, FDI, and infrastructure positively influence a country's position in the African trade network. Conversely, trade costs, the global financial crisis, and regional overlapping memberships negatively affect network based integration. Our findings suggest that enhancing a country's connectivity in the African trade network involves identifying key economic and institutional factors of trade partners and strategically focusing on continent-wide agreements rather than just regional ones to boost economic growth.