Trade and Regional Economic Development

Arbeitspapier

A central argument for trade liberalization is that when the 'gains from trade' are shared, countries see large gains in economic development. In this paper, I empirically evaluate this argument and assess the impact of elite capture on regional development. Africa provides a unique study ground because the arbitrary placement of country borders during the colonial period partitioned hundreds of ethnic groups across borders. This partitioning is a source of variation in population heterogeneity and cross-country connectedness that is independent of economic considerations. Thus, African borders provide both a credible instrument for bilateral trade flows and enable the assignment of trade flows –and their impacts– to individuals. I find that while ethnic networks increase trade flows, increased trade activity decreases subnational economic development when measured by satellite data or individual wealth. I show that this counter-intuitive result comes from elite groups capturing the gains from trade, with detrimental impacts on trust and democratic progress in society.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 10270

Classification and Topics

• Classification: Wirtschaft
• Subject: Handelsliberalisierung ; Außenhandel ; Ethnische Beziehungen ; Regionalentwicklung ; Außenhandelsgewinn ; Afrika

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bühler, Mathias
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/271914
• Last update: 10.03.2025, 11:42 AM CET