The Economic Value of Regional Integration in Africa


Diery Seck, CREPOL

Abstract

The study examines the economic gains that accrued to African countries that are members of regional integration arrangements over the last 40 years.  Economic gains are assessed from three perspectives: enhanced trade, real convergence and welfare gains.  Gains from increased trade are measured by way of estimates of trade creation and trade diversion that benefit member countries. The approach of export enhancement through regional integration is compared to the strategy of single country promotion of global exports aimed at achieving higher levels of economic growth as opposed to regional integration strategies.  The second value criterion of regional integration aims to examine the extent to which members have levels of income that tend to converge towards the country with the highest per capita income thus giving rise to more income uniformity across the region.  The first measure is the evolution over time of the average difference of incomes between the country with the highest income and the incomes of the other members.  The second measure is the evolution over time of the standard deviation of rates of growth of the per capita GDP of all member countries.

The hypothesized contribution of regional integration to the welfare of its members is measured with three approaches.  First, the rise in per capita income as a result of membership is examined over time and as the integration process deepens.  Second, considering that countries prefer lower volatility of their key economic variables, the evolution of the standard deviation of exports of member countries is computed considering that stable export markets and lower volatility of nominal exchange rates could be benefits of regional integration.  Finally, the general welfare of residents of member states is assessed over time through the evolution of countries’ respective Human Development Index (HDI) computed by the United Nations Development Program (UNDP) 


Recent Publications - View all