Economic Integration and Entrepreneurship in West Africa


Ousmane Seck, CREPOL and Francis Kemegue

Framingham State University

I-Introduction

 

The sovereign debt crisis that has affected the European Union over the last four years and the difficulties of countries such as Greece, Italy, and Spain in financing their deficits at a reasonable cost has exposed the costs of monetary unions. This adds to the challenges of African decision makers in designing an efficient model towards a single currency for the continent. Economic integration is generally viewed as a facilitator of economic and social development with an expected positive impact on job creation. This research attempts to quantify that effect by focusing on testing the effects of economic integration on new business formation. Using data from World Development Indicators, World Bank Entrepreneurship Group (World Bank, 2010a, 2010b) and the International Labour Office database on Labour statistics, our analysis will focus on newly registered businesses per year in West African countries and compare the performances of UEMOA country members to the other ECOWAS countries in fostering new businesses and creating jobs.

Given the positive and straightforward link between economic growth and employment, and the vast literature on the relationship between economic integration and economic growth [See World Bank(2003), Balassa (1961), Baldwin (1993) , Henrekson et al.(1997) , Landau (1995) and Walz (1998)], it can be argued that higher employment levels should be expected from higher economic and monetary integration. Economies of scale in production and in the sector of research and development, more competition, lower cost of capital resulting from more integrated capital markets are some of the channels through which integration could lead to higher employment levels. This makes testing for such effects highly relevant in West Africa. However, the lack of high quality and disaggregated data on employment in developing countries in general, and in West Africa in particular, would be our main challenge. We use available data on newly registered businesses, and employment to test if there are measurable benefits from economic and monetary integration in West Africa by comparing UEMOA countries to the other ECOWAS countries.


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