Global Value Chains and Industrialization in Africa
African Economic Research Consortium
The objective of this study is to analyse the main effects of the integration of African countries in the global value chains (GVCs) on their industrialization level. To this effect, we have specified an industrialization equation that takes into account the economic characteristics of the continent. We have then estimated that equation by the system GMM estimator method on a sample of 51 African countries with panel data spanning the period 1996‒2018 sourced from international organization databases. The findings of the estimations are the following: (1) the participation and the position of African countries in GVC positively contribute to their industrialization. The imports of intermediate goods facilitate the access to foreign machinery and technologies, which stimulate local production. Furthermore, the position in value chains that are limited to assembling activities would also allow for achievement of significant industrial progress; (2) the main factors influencing the indirect transmission of GVC to industrialization are the human capital and the physical capital; (3) the results are stable as shown by several robustness check tests related to different modalities of integration in GVC, to the conception of a new participation indicator in GVC, and to sub-regional specificities. On the basis of these results, we recommend policy actions to enhance participation, but also to improve the position in GVC, while at the same time an appropriate strategy would be designed to accumulate human capital and physical capital in the long term.
Industrialization; GVC; Africa; Dynamic panel; System GMM.