Trade liberalization and infrastructure development: Evidence from the Economic Community of West African states

Abstract

Not much is known in the literature concerning the role of trade-oriented policies in promoting infrastructural development particularly for African countries. This study examines the role of trade liberalization on infrastructural development in Africa using data from 15 member-countries in the Economic Community of West African states (ECOWAS) over the period 1993 to 2018. Data was obtained from the World Bank’s World Development Indicators and the African Development Bank. Measures of infrastructure considered include transport, energy, telecommunication and the composite infrastructure index. Findings are provided with use of the PARDL model. The results showed no significant effect of trade liberalization on all measures of infrastructure except for telecommunication where significant positive effects were observed but only in the long run. Long run estimates also showed negative effect of increase in tax revenue on infrastructure development specifically for transport. Findings further showed positive effects of increase in real income on energy and the composite index on infrastructure in the long run with short run results depicting negative effects. Evidence provided suggests the key role of trade liberalization in boosting infrastructure development mainly for telecommunication. In pursuing trade-oriented programs, governments in the region should focus on promoting infrastructure in the areas of transport and Energy as the region will continue to lag behind in these key areas in the advent of trade policies. Efforts should also be made to increase budgetary allocations to infrastructure investment in the attempt to maximize trade benefits and ensure sustainable development. This again is important as governments in the African region seek to pursue larger trade bloc operations in the AfCFTA.