Towards promoting African participation in global value chains: Does infrastructure development matter?

Abstract

This study investigates the effects of infrastructure development on African global value chain (GVC) participation. Infrastructure development is proxied by a composite index which encompasses ICT, transport network, electricity and water supply while considering both the backward and the forward dimensions of GVCs. Findings from the Discroll-Kraay and system Generalised Method of Moments reveal that infrastructure development promotes African participation in GVCs for both up and down streams. These results are robust across different types of infrastructures and income groups. The transmission mechanisms with the interaction between infrastructure indicators, human capital, foreign direct investments (FDI), and governance procure negative synergy effects for electricity, transport and water supply and positive synergy effects for ICT. Both positive and negative net effects emerge but are nullified at respective governance, human capital and FDI thresholds. Based on the results obtained, practical policy implications are discussed.

Keywords

• H54
• J24
• O55