This paper asks whether trade facilitation can contribute to the
reduction of the spatial agglomeration of economic activity in
sub-Saharan Africa (SSA). It is often perceived that the opposite is
true: i.e. that inequality between regions is bound to widen when a
country is opening up to trade, as indicated by deteriorating living
conditions in African cities despite their higher-than-average incomes.
However, if the Krugman–Livas hypothesis holds for Africa, trade
openness can contribute to alleviating Africa’s urban problem by leaving
governments and donors more time to build the sanitary and
transportation infrastructure that urban growth requires.
To explore this hypothesis in the SSA context, this paper adopts the
approach of proxying the location of economic activity through the
measurement of night-light emissions as captured by satellites, and
proxying the reduction of trade barriers by improvements in Logistics
Performance Index scores.
The results suggest that activity seems to have agglomerated away from
borders in sub-Saharan Africa, but that this agglomeration effect was
dampened by trade facilitation. Agglomeration is identified through an
‘iron-curtain’ effect whereby night-light emissions decrease along major
cross-border highways as one gets closer to a border. This effect is
strongly present and has reinforced itself over time. However, it is
significantly dampened by trade facilitation, an effect that seems
robust to the inclusion of powerful arrays of fixed effects and a
variety of estimation approaches.
These results are important for policy-makers and development partners,
as they suggest that, beyond their well understood effects on trade and
growth, trade-facilitation projects can also have desirable effects on
the location of economic activity, making growth more balanced
spatially. The development of activity in peripheral areas is a highly
desirable alternative to sprawling urban centres with severely deficient
sanitary and transport infrastructures; moreover, it can contribute to
more inclusive growth and to the local consolidation of peace processes.
Cadot, O.; Himbert, A.; Jouanjean, M-A. Trade facilitation and concentration: evidence from Sub-Saharan Africa. ODI, London, UK (2015) 25 pp.
Trade facilitation and concentration: evidence from Sub-Saharan Africa