Impact of Regional Road Infrastructure Improvement on Intra‐Regional Trade in ECOWAS

Abstract

This study employs the gravity model of trade to examine the impact of improving the quality of a regional road infrastructure in the ECOWAS sub-region, from its current level to the level of roads in South Africa, on intra-regional trade. The study augments the traditional gravity model to include variables for language, common border and road quality. The positive difference in per capita GDP of trading partners is also included to test the Linder hypothesis. The parameters in the model are estimated using the random-effect model and the result shows that such improvement will lead to a US$356.06 million (4.97 per cent) increase in intra-regional trade relative to the 2012 level, ceteris paribus. Moreover, the ancillary benefits of improvement in road quality in terms of increased movement of factors of production will foster further intra-regional trade in the medium and long terms. To enhance the benefits of the improvement in the road quality, ECOWAS governments needs to put in place other 'soft' infrastructures to fast-track the achievement of the objectives of the ECOWAS trade liberalization scheme. However, increasing the quality of roads demands huge financial investment, thus a cost-benefit trade-off must be carefully considered.

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