Agricultural trade, foreign direct investment and inclusive growth in developing countries: evidence from West Africa

Abstract

This study examines how agricultural trade and Foreign Direct Investment (FDI) influence inclusive growth in developing countries, using the case of West Africa. It engages data obtained from various World Bank sources for 15 West African countries that are members of the Economic Community of West African States (ECOWAS) for the period 2000–2019. The study calculates inclusive growth using the Principal Component Analysis (PCA) and applies the Two-stage Least Squares (2SLS) to resolve the possible issue of endogeneity. The findings show, among others, that agricultural trade is significant in explaining the level of inclusive growth. It implies that a 1% increase in agricultural trade may increase inclusive growth by 0.88% (first stage) and 0.99% (second stage), respectively. In contrast, FDI is insignificant in explaining inclusive growth. Therefore, the study recommends that effective policies such as flexible trade policies to enhance the exchange of goods and services should be implemented, which is crucial given the need for more resilience in post-COVID-19 ECOWAS.

Keywords:

• Agricultural trade
• COVID-19 pandemic
• FDI
• inclusive growth

JEL Codes:

• F13
• R11

Acknowledgements

The helpful comments of the anonymous reviewers are highly appreciated. The earlier version of the paper was presented at the International Conference on Business and Finance (ICBF 2020), organised by Institute of Business Research, University of Economics Ho Chi Minh City, Vietnam 27–28th August 2020. The views expressed are those of the authors.

Disclosure statement

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

Notes on contributors

Romanus Osabohien is a Lecturer, Department of Economics and Development Studies, Covenant University, Nigeria. His main research focus include Food Security and Social Protection. He has attended and presented research papers in international conferences/workshops and has published many peer-reviewed scholarly articles in high impact journals.

Badar Alam Iqbal is the Emeritus Professor FBIAR, Ghana, Extraordinary Professor at College of Graduate Studies (ST RGS), University of South Africa, Adjunct Professor at Monarch Business School, Switzerland. He is the receipent of Fulbright SIR twice and DAAD three times and has been enlisted at Directory of African Scientists (non-African Group).

Evans Osabuohien is a Professor of Economics and Head, Department of Economics & Development Studies, Covenant University, Nigeria. He has published three books and over 145 scholarly articles. In 2020, he was recognised as ‘One of the 6 Youngest Professors in Nigeria’. He is a fellow of Alexander von Humboldt Foundation.

Muhammad Kaleem Khan is a researcher, Department of Business Administration, ILMA University, Karachi, Pakistan.

Dong Phong Nguyen is a researcher and seasoned university leader at Institute of Business Research, University of Economics Ho Chi Minh City, Vietnam.

Notes

1 Countries used for the analysis include; Benin, Burkina Faso, Cape Verde, Cote d'Ivoire, Gambia, Ghana, Guinea, Guinea Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo.

2 The effect of COVID-19 pandemic might have some influence on the interactions among agricultural trade and inclusive growth; however, the time-series data to assess it is not yet available. Hence, it is worth investigating in future studies.

Additional information

Funding

The first and third authors acknowledge the supports from Alexander von Humboldt Foundation (AvH)'s Equipment Subsidy Grant [REF: 3.4-8151/19047] awarded to the Centre for Economic Policy and Development Research (CEP DeR) that facilitated the revision of the paper. In addition, the third and last authors appreciate the support from the University of Economics Ho Chi Minh City, Vietnam (Institute of Business Research Project).