Services trade and infrastructure development: Evidence from African countries

Abstract

Using a dynamic system GMM estimate, this study analyzed the impact of services trade on the development of infrastructure in 38 African countries over the period 2000–2020. Telecommunications, trade/transport-related, and port infrastructures were modelled as the dependent variables on services trade openness. Other sets of control variables include real GDP, financial development, gross fixed capital formation, external debt, population density, urbanization, exchange rate, and services value-added. Our empirical strategy revealed that regardless of the infrastructure indicator used in the estimate, services trade, GDP, financial development, external debt, and services value-added significantly promote the development of infrastructure in the continent. Capital formation increases trade/transport-related and reduces port infrastructure while population density increases trade/transport-related and port infrastructure. The finding further indicates that urbanization increases telecommunications and reduces trade/transport-related infrastructure. The exchange rate reduces the development of telecommunications and port infrastructure. The findings are therefore vital to present policies related to services trade and infrastructure development in African countries.

Keywords:

• Services trade
• infrastructure development
• dynamic system GMM
• African countries

JEL Classification:

• F10
• H54
• L18
• N77
• O18

PUBLIC INTEREST STATEMENT

This study analyzed the impact of services trade on the development of infrastructure in 38 African countries over the period 2000–2020. Telecommunications, trade/transport-related, and port infrastructures were modelled as the dependent variables on services trade openness. Other sets of control variables include real GDP, financial development, gross fixed capital formation, external debt, population density, urbanization, exchange rate, and services value-added. Our empirical strategy revealed that regardless of the infrastructure indicator used in the estimate, services trade, GDP, financial development, external debt, and services value-added significantly promote the development of infrastructure in the continent. Capital formation increases trade/transport-related and reduces port infrastructure, while population density increases trade/transport-related and port infrastructure. The finding further indicates that urbanization increases telecommunications and reduces trade/transport-related infrastructure. The exchange rate reduces the development of telecommunications and port infrastructure. The findings are therefore vital to present policies related to services trade and infrastructure development in African countries.

Disclosure statement

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

Additional information

Funding

The authors received no direct funding for this research.

Notes on contributors

Kabiru Hannafi Ibrahim

Kabiru Hannafi Ibrahim, Ph.D., is a Lecturer and Researcher at the Federal University, Birnin Kebbi Nigeria. He obtained his Ph.D. in Economics from Universitas Airlangga, Surabaya, Indonesia. He is presently the Postgraduate Program Co-Ordinator of the Economics Department, Federal University, Birnin Kebbi Nigeria. His area of research includes bilateral and multilateral trades, the environmental impact of free trade, and applied econometrics among others.

Rossanto Dwi Handoyo

Rossanto Dwi Handoyo, Ph.D., is an Associate Professor at the Department of Economics, Airlangga University, Surabaya, Indonesia. He is also a researcher and consultant at the Ministry of Trade of the Republic of Indonesia. He is presently the Head of the Economics Department at the Faculty of Economics and Business, Airlangga University. His research interest is in the field of international economics as well as development studies.