A Macro and Micro Analysis of Value Chain Trade in Africa
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Date
2022-07
Authors
Montfaucon, Angella Faith
Nigatu, Natnael Simachew
Majune, Socrates
Journal Title
Journal ISSN
Volume Title
Publisher
African Economic Research Consortium
Abstract
Africa's participation in global value chains (GVCs) is not well documented compared
to the developed world. Clearly understanding GVC participation levels is critical to
enable evidence-based policy. This paper assesses Africa's GVC participation from both
macro and micro perspectives using three sources of data, and empirically estimating
determinants of GVC participation across the data. The analysis relies on databases
based on global input-output tables, customs-level data, and survey data from which
measures of GVCs are constructed. We find that aggregate GVC data masks disparities,
as Africa's proportion of firms that participate in GVCs is comparable to other regions,
but the level of Africa's GVC trade is much lower. A common theme in the multi country empirical results across two sets of data is the positive relationship between
political stability and backward GVC participation of African countries. Comparatively,
improvement in political stability and proximity to major regional hubs are more
relevant for Africa than other regions. For single country analyses, the consistent
result is that FDI is positively associated with backward GVC participation, both at
the firm-level and country-level of analysis. This highlights how much institutions
and the need to attract FDI are relevant in promoting Africa's future engagements
in global values chains. The inconsistencies in the data, however, suggest the need
to consider establishing protocols and database that help understand Africa's GVC
participation more coherently to enable policy makers to make informed decisions.
Description
Keywords
Global value chains; Firms; Africa.