The Impact of Economic Diversification on Economic Growth in Landlocked African Countries – A Panel Data Analysis Using GMM Approach

Abstract

We examine the impact of export diversification on Economic growth using system Generalized method of moments (GMM) Model in the case of sixteen Landlocked countries in Africa, using annual data during the period 2005 to 2015. Most of the countries with lower economic growth and lower HDI are landlocked countries in Africa. However they have enough untapped potential to come out of their curse, most of these countries specialized on one or two goods for their export revenue. In this study a growth model has been developed by incorporating export product concentration and real gdp per capita as a proxy for export diversification and economic growth respectively to analyse the impact on export product diversification on economic growth. The result indicated that export product concentration has a significant and negative impact on economic growth. Therefore the policy suggests that the countries should focus more on export diversification-led-growth. The study also recommended that the governments of the respective countries, privet sector and civil societies assist in exploiting new opportunities in international trade by providing enough research and technical expertise, entrepreneurial and financial support and adopt new and innovative strategies.

Keywords: Export diversification, Economic growth, GMM model, Landlocked African countries