Job market paper
Why Don't African Countries Trade More With Each Other? The Role of Border Crossings in General Equilibrium
Despite geographical proximity and recent reductions in tariffs among African countries, there has been relatively little trade within Africa compared to its trade with other continents. This paper looks at recent improvements in border and port efficiencies in South and East Africa to estimate how such trade frictions affect trade flows. I use a general equilibrium gravity model with multiple sectors and trade with the rest of the world in order to capture both direct and indirect effects from border improvements. The reduction of border wait times from a 30-hour average to 10 hours is estimated to have increased internal trade by 3.96 billion USD. This amounts to 21% of the total increase in trade between African countries during 2008 and 2014 with inland countries having a greater benefit. I then conduct a series of counterfactuals such as making borders as efficient as developed countries. I find an additional 9.46 billion USD of internal trade could be gained in this scenario.