What Effects Does Export Diversification and Sophistication Have on Trade Flows within ECOWAS?

Abstract

The objective of this study is to determine the effect of export diversification and sophistication on intra-ECOWAS trade from 1995 to 2020. To do this, the Poisson Pseudo-Maximum Likelihood (PPML), Gamma Pseudo Maximum Likelihood (GPML) and Spatial Error Model (SEM) methods were used. The results obtained confirm that the sophistication and vertical diversification of exports, unlike the extensive margin, have a significant positive effect on intra-ECOWAS trade. Similarly, the traditional trade variables show signs that are in line with expectations, with the exception of the GDP per capita variable for the exporting country and the common external tariff variable, which show a negative sign. In addition, this analysis reveals very clearly that several significant factors are detrimental to intra-ECOWAS trade, including distance and non-tariff barriers.