Export capacity and capital stock augmentation through imports: Evidence from Sub-Saharan African countries

Abstract

This paper investigates the capital goods imports of Sub-Saharan African (SSA) countries from 2002 to 2017. The composition of capital goods imports has become less diverse over time in more than half of the countries studied. Colonial ties no longer determine the sourcing of capital goods as China is now the top source. Trade gravity regressions using the Poisson pseudo-maximum-likelihood estimator show that bilateral exports of non-primary products by SSA countries and their low-income peers are associated with increased net stock of imported general-purpose capital goods. Additionally, there is evidence that the net stock of some types of imported equipment and machinery is associated with increased non-primary exports of items utilising these capital goods with elasticity estimates ranging from 0.10 to 1.10. Thus, there is some form of economic restructuring in the region gleaned from increased exports of non-primary products brought about by capital stock augmentation through imports.