Dynamics of Trade Liberalisation and Inclusive Growth in West Africa

Abstract

This study empirically examines the effect of trade liberalisation on inclusive growth in West Africa over the period 2000–2023 using balanced panel data sourced from the World Bank’s World Development Indicators. Inclusive growth is measured using a multidimensional index aligned with the UNCTAD (2022) framework, capturing economic performance, living standards, and inequality. Principal Component Analysis is employed to generate the index, thereby reducing multicollinearity while preserving informational content. The empirical strategy combines descriptive statistics, diagnostic tests for multicollinearity and cross-sectional dependence, and Panel Corrected Standard Error (PCSE) estimation to ensure robustness. The findings indicate that trade liberalisation has a positive effect on inclusive growth, suggesting that greater openness enhances market access, thereby promoting competition and improving resource allocation. Domestic credit and control of corruption also exert positive and significant influences, highlighting the roles of financial deepening and institutional quality in fostering inclusive development. In contrast, inflation and foreign direct investment display statistically insignificant effects at the regional level. Country-specific estimates further reveal substantial heterogeneity in the impact of trade liberalisation and macroeconomic variables across West African economies, reflecting differences in structural conditions and institutional capacities. Based on these results, the study recommends strengthening trade facilitation frameworks, deepening regional integration, improving access to domestic credit, promoting export diversification, and implementing complementary social protection and institutional policies to ensure that the gains from trade are equitably distributed. The study’s key contribution lies in developing a multidimensional inclusive growth index for West Africa, thereby moving beyond conventional GDP-based measures that may inadequately capture the breadth of inclusive growth outcomes.