Analyzing the Efficiency of Trade in Africa: A Stochastic Frontier Gravity Approach to Assess Intra-African Exports Performance and Potential

ABSTRACT

The African integration projects established regional economic communities (RECs) to remove trade barriers and stimulate trade among the member countries. Our analysis aims to assess REC trading efficiency and explore trade potential. Assuming that any discrepancy between the observed trade level and the maximum predicted trade level is related to trade inefficiencies, the stochastic frontier gravity is estimated for a sample of 45 African exporting countries and their 43 African partners from 1996 to 2020. The results show low export efficiency among African countries, corresponding to sizable unexploited export capacities.

KEYWORDS:

• Gravity model
• regional economic integration
• stochastic frontier approach
• trade efficiency
• trade potential

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ PNUD (2011).

² https://wits.worldbank.org/

³ Standard International Trade Classification (SITC Revision 3).

⁴ https://www.rug.nl/ggdc/productivity/pwt/?lang=en

⁵ https://www.govindicators.org

⁶ See Battese and Coelli (1995).