Impact of south-south FDI and trade on the export upgrading of African economies

Abstract

We explore the impact of FDI and imports, disaggregated at the sectorial level, on the upgrading of African exports. We distinguish flows from other developing countries (South-South) and developed countries (North-South), and find that they impact differently on the ability of recipients to absorb the positive spillovers. Results support the view that South-South integration holds a strong potential for African economies. South-South FDI foster diversification of low-tech industries and raise the average quality of manufacturing exports, while importing from the South increases the ability to expand the variety of manufactured exports and to introduce more advanced goods in less-diversified economies.