Globalisation and economic growth in Africa: New evidence from the past two decades

Abstract

Background: In the last two decades, the world experienced two overlapping global shocks – that is, the 2008–2009 financial crisis and the COVID-19 lockdowns – with severe social and economic consequences on African economies that have, once again, brought to the fore the intricate role that globalisation plays in economic growth because of grave risks that often accompany it.Aim: We consider three research questions about globalisation: (i) does globalisation heighten economic growth? (ii) is there a statistically significant threshold level of globalisation above which globalisation affects growth differently than at lower levels? (iii) what factors moderate the globalisation-economic growth nexus?Setting: A panel of 47 selected countries from Africa from 2001 to 2018 is under scrutiny.Method: To begin, it applies an overlapping five-year moving average (MA) to smoothen the data. In addition, we employ the revised globalisation index and the two-step systems generalised method of the moment (GMM) in its empirical strategy.Results: We find a largely insignificant relationship between globalisation and economic growth. We attribute these results to Africa’s infinitesimal share – less than 5% – in foreign direct investment (FDI) and global trade, acute infrastructure deficit and the lack of relevant skills that lead to productivity losses and weak performance within the international business ecosystem. We also find, among others, that globalisation is more effective in countries with more gross capital formation, higher population and urban growth rates.Conclusion: For Africa to maximise its growth potential from globalisation, sound policies should be put in place to promote trade, FDI, domestic capital formation and urbanisation. We suggest that future studies investigate the long-run equilibrium relationship between globalisation and economic growth.

Economic globalisation and labour market outcomes in Africa

“…My results align with the jobless growth hypothesis and emerging literature (Beri et al, 2022;Meagher, 2016). The study has three unique methodological features (Adamu et al, 2018;Anyanwu, 2013;Asongu et al, 2020;Awad, 2019;Ben Salha, 2013).…”

“…In fact, trade liberalisation, among other market reforms, is a central development strategy in African countries because of its putative role in driving cross-border investments, labour mobility, job creation and economic convergence. For these reasons, many empirical studies have estimated a positive correlation between globalisation, labour market outcomes and economic growth (Anyanwu, 2014;Asongu et al, 2020), although emerging literature also suggests that the significance of this relationship hinges on some preconditions, empirical models and the choice of control variables (Beri, Mhonyera, & Nubong, 2022;Rudra & Tobin, 2017).…”

Globalisation and Inclusive Growth in Africa: The Role of Institutional Quality

“…Dreher (2006), using data from 123 countries, submitted that although economic globalisation may have a positive effect on economic growth, political globalisation does not. Beri et al (2022), who investigated the effect on economic growth in 47 African countries from 2001 to 2018, did not find any significant effect of globalisation on economic growth in Africa. They attributed their findings to the low share of African countries in FDI, global trade and infrastructural deficits.…”

“…Concerning the effects of institutions, we constructed an index that captures institutional quality by employing six institutional variables (voice and accountability, political stability and absence of violence/terrorism, government effectiveness, regulatory quality, rule of law and control of corruption). Principal component analysis (PCA) 4 was used to construct the index (for details, see Beri & Nubong 2022). However, in contrast to the procedure followed in Beri and Nubong (2022), we constructed the institutional quality index for each of the sampled economies individually.…”

“…Hence, the economic consequences of globalisation in developing countries are manifesting in terms of a myriad of inefficient industries, job loss and welfare deterioration (Hartungi, 2006; Stiglitz, 2002, p. 17; Ulaşan, 2015). In fact, Beri et al (2022) argue that the effectiveness of globalisation hinges on several factors such as gross capital formation, population size and urban growth rate.…”