TITLE:
Examining Trade by Destination, Innovation and Human Development in FOCAC
AUTHORS:
Elias Ellias Tsokalida, Jun Yang
KEYWORDS:
Human Development, Innovation, Economic Growth, Capital Imports, Trade, FOCAC
JOURNAL NAME:
Open Journal of Business and Management,
Vol.7 No.3,
July
10,
2019
ABSTRACT: There are few empirical research papers on the impact of trade by destination
on human development, most of which focus on the direct impacts completely
ignoring the indirect impacts through various channels. The main objective of
this paper was to examine the impact of trade by destination towards strategic
partners on human development through innovation channel captured using capital
imports, while controlling for endogenous impacts from economic growth and at
the same time providing new evidence on the direct impacts. This study was
demonstrated using a sample of 40 Sub Saharan African countries (SSACs) and
their trade partnership with China under the Forum for China-Africa Cooperation
(FOCAC) framework for the period from 2000 to 2017. To avoid bias, the study
controlled for other SSACs trade partners using rest of world trade patterns. The
framework was estimated using two simultaneous equation generalized methods of
moments (GMM) for economic growth and human development and also considering
that trade and innovation can impact both economic growth and human development.
The results indicated that both SSACs
trade openness towards China and SSACs trade openness towards rest of world,
had positive and significant impacts on human development at 1% level. The
study also found that innovation from China and innovation from rest of world
had both negative and insignificant impacts on human development. The results
were robust to simultaneous equation three stages least squares (3SLS) and
single equation two-step GMM. The study also found comparable results when time
period was extended from 1990 to 2017 and innovation was instead captured using
total capital trade. These findings suggest that trade partnerships matter for
enabling potential gains from trade openness on human development and to
maximize such gains, SSACs need to reform and incorporate human development
aspects in their key policies including innovation as these create a conducive
environment through which trade impacts can be sustainable and inclusive.