Determinants And Welfare Effect of Trade Flows in Sub-Saharan Africa: Empirical Evidence From SADC and COMESA

Abstract

This study investigated the determinants and welfare effects of intra-Sub Saharan Africa trade from 1996 to 2021. The study utilized Negative Binomial Pseudo Maximum Likelihood for the analysis. The study's findings revealed that Gross Domestic Product (GDP), population, distance, time taken for import, bilateral real exchange rate, voice and accountability, law and order, and government effectiveness are the key determinants of trade flows in SADC. Furthermore, the results indicated that GDP, population, distance, common official language, landlocked of both countries, time taken for import procedures to be completed, bilateral real exchange rate, reduction in political instability and absence of violence, and regulatory quality determined trade flows in COMESA. The study also found that intra-regional trade leads to welfare reduction for SADC member countries and a welfare-enhancing situation for COMESA. Thus, the study recommended that policymakers give transportation facilities the required attention to reduce trade barriers. Also, the policymakers in SADC should introduce policies and incentives that will encourage members to import from other members of the bloc. Finally, policies towards making the governance institutions and security apparatus viable should be implemented to promote trade and enhance welfare in SADC and COMESA.