The determinants of participation in global value chains: The case of ECOWAS

Tinta, Abdoulganiour Almame Article The determinants of participation in global value chains: The case of ECOWAS Cogent Economics & Finance Provided in Cooperation with: Taylor & Francis Group Suggested Citation: Tinta, Abdoulganiour Almame (2017) : The determinants of participation in global value chains: The case of ECOWAS, Cogent Economics & Finance, ISSN 2332-2039, Taylor & Francis, Abingdon, Vol. 5, Iss. 1, pp. 1-14, https://doi.org/10.1080/23322039.2017.1389252 This Version is available at: https://hdl.handle.net/10419/194729 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ Tinta, Cogent Economics & Finance (2017), 5: 1389252 https://doi.org/10.1080/23322039.2017.1389252 GENERAL & APPLIED ECONOMICS | RESEARCH ARTICLE The determinants of participation in global value chains: The case of ECOWAS Abdoulganiour Almame Tinta 1,2 * Abstract:Regional integration is the strategy adopted at the continental level to strengthen Africa’s development. However, the different regional blocs already established on the continent face many challenges. Based on the economic integration of the ECOWAS (Economic Community of West African States) region, this research analyzes the role of participation to Global Value Chain (GVC) in international trade as a crucial factor. Using a gravity model with Panel using fixed effects, the findings show that intra-regional trade is not significant in the explanation of the trade openness degree of countries but an increase in backward integration to GVC raises trade openness. The results also indicate how the competitiveness of trade structure and the structural factors related to countries affect the performance of GVCs. Intra-regional trade must further be inserted in the production of final goods which involves the maximum number of countries for the intermediate steps. Subjects: Industrial Economics; International Trade (incl. trade agreements & tariffs); Development Economics Keywords: trade openness; regional integration; globalization JEL classifications: F13; F15; O14 1. Introduction One of the most discussed themes over the past two decades in research work, political discourse, and international media is regional integration. The extent of the emergence of regional integration *Corresponding author: Abdoulganiour Almame Tinta, Department of Agricultural Economics and Agribusiness, University of Ghana, Accra, Ghana; CEDRES, Unité de Formation et de Recherche en Sciences Economiques et de Gestion, Université Ouaga II, Ouagadougou, Burkina Faso E-mails: [email protected]r, [email protected] Reviewing editor: Caroline Elliott, Aston University, UK Additional information is available at the end of the article ABOUT THE AUTHOR Abdoulganiour Almame Tinta completed his PhD in Applied Agricultural Economics and Policy at University of Ghana in Ghana. He is a PhD candidate in Economics at Université Ouaga 2 in Burkina Faso. He completed his MPhil in Finance and Banking at African School of Management. He has taught at many universities in Burkina Faso (Ouaga 2, USTA, Ouaga 3S) and Université de Bamako in Mali. Former consultant of CIRAD (Office of Ouagadougou), he is currently teaching at Université Ouaga 2 and a member of MPhil committee thesis reviewer at Université Ouaga 3S. Engineer in Finance and Banking, he is a consultant of a Worldwide Network Marketing company. His research interests focus on finance and banking, monetary policy, applied econometric, agricultural policy and international economics. PUBLIC INTEREST STATEMENT Although trade in value chains has emerged in the early 2000s and has rapidly developed and imposed, empirical works are still missing: the links, the connections and the various implications in the value chain being not well received. GVC is an emerging opportunity for African countries to better insert in international trade and overcome barriers that obstruct their development. This research focuses on ECOWAS and addresses some questions unanswered by most studies: why regional integration really matters for members in African countries? Why opening the markets to States from the same integration before opening them to the rest of the world can be more interesting than move directly to multilateral liberalization? This indicates how regional integration can speed countries insertion into value chains. This result can be useful for policy-maker in designing adequate development strategies and efficient industrial policies for West African States. Received: 24 July 2017 Accepted: 04 October 2017 First Published: 10 October 2017 © 2017 The Author(s). This open access article is distributed under a Creative Commons Attribution (CC-BY) 4.0 license. Page 1 of 14 Page 2 of 14 Tinta, Cogent Economics & Finance (2017), 5: 1389252 https://doi.org/10.1080/23322039.2017.1389252 remains closely linked to the rise of globalization and the need for countries to negotiate agreements to facilitate all forms of exchanges and transactions. The promises of regional integration since the publication of Viner (1950) and Balassa (1967) have had positive feedback for some groups of countries (NAFTA, MERCOSUR, ASEAN) and negative for others mostly African economies (COMESA, ECOWAS, ECCAS). However, regional integration remains crucial for Africa to increase its competitiveness and diversify its economy, and especially for fragile economies such as Economic Community of West African States (ECOWAS). To benefit from the potential of regional integration, the authors (McCallum, 1995; Rose & van Wincoop, 2001) emphasize the need to fulfill certain prerequisites in order to avoid trade diversion such as geographical proximity, the rule of law, democracy and good governance, macroeconomic stability, political commitment, and the existence of real common interests. Common historical, cultural and political environments also have a favorable effect on regional integration. However, regional integration may prove difficult to boost intra-community trade when countries have different preferences or export incompatible products, as is the case in Africa. Despite the grouping of West African countries into a regional bloc and the reduction of tariffs within the Community, intraregional trade (8.9% in 2014) is still marginal because of the low similarity (30% in 2014)1 between countries products. How to increase intra-regional trade in spite of the difference in the member countries trade? Thinking about this issue, GVC can be the missing link to strengthen the regional integration and increase intra-community trade even if the similarity in term of trade among countries is weak. Therefore, understanding the role of participation to GVC on international trade can help African countries to take benefit from regional integration. GVC is an emerging opportunity in recent years establishing not only an interconnection between countries but also raises their competitiveness in world trade (International Monetary Fund, 2016; World Trade Organization, 2014). Even if the trade structure of ECOWAS countries prevents them to compete within the integration and hinders their participation in the global market where products are subject to a highly competitive environment, creating a trade value chain inside the Community can overcome the challenges. This research analyzes the effect of an insertion to GVC on the degree of trade openness and the key determinants which indirectly affect GVC performance. Using the gravity model of trade (Choi, 2013; Noguera, 2012)2 with UNCTAD data in ECOWAS countries, we measure GVC participation as mentioned in recent research (AfDB, OECD, & UNDP, 2014; De Backer & Miroudot, 2013; International Monetary Fund, 2016; OECD, WTO (Organisation for Economic Cooperation & Development, World Trade Organization), & The World Bank, 2014; World Economic Forum, World Bank, & African Development Bank, 2015) by backward integration which captures the extent to which domestic firms use foreign intermediate value added for exporting activities in a given country. Two broad factors have been identified in the literature to influence the degree and type of GVC integration: non-policy or structural factors and policy factors. Based on the gravity theory of trade, market size, level of development, degree of industrialization and trade costs are used as non-policy factors and trade performance indicators are used as policy factors. The results indicate that intra-regional trade is not significant in the explanation of the trade openness degree of ECOWAS countries but an increase in backward integration raises trade openness. More precisely, intra-community trade is insufficient and unable to divert trade vis-à-vis the rest of the world, and backward integration is a powerful instrument for countries to strongly insert themselves in world trade. In addition, the performance of GVC is closely related to product diversification, foreign direct investment inflows, intra-community trade, the level of development, the degree of industrialization and domestic value added. The study contributes to the literature on international trade and GVC by analyzing the impact of regional integration, and empirically examines the implications that previously were not included. Therefore, the study helps policy-makers to build adequate development strategies including trade and industrial policies for West African States in globalizing world. Page 3 of 14 Tinta, Cogent Economics & Finance (2017), 5: 1389252 https://doi.org/10.1080/23322039.2017.1389252 The rest of the paper is organized as follows. Section 2 introduces the concept of GVCs and presents a brief literature review. Section 3 describes the methodology. Section 4 discusses the results and Section 5 concludes. 2. The concept of GVC and literature review Although Hirschman (1958) already discussed backward and forward linkages, the concept of value chains was introduced by Porter (1985) in the industry sector and described all the activities that should work together harmoniously to produce and sell a product while making it possible for actors at all levels to obtain the highest possible profits. However, the application of the concept has extended over the years to areas other than industry with the development of international trade since the early 1990s, characterized by the increasing integration of the world economy. As a result, value chains have become more internationally segmented (Faße, Grote, & Winter, 2009; Gereffi & Fernandez-Stark, 2011). Production processes previously dispersed become connected offering a golden opportunity for many countries to intensify their comparative advantages. The processing of one product is carried out by different enterprises in several countries. Trade in GVC which Asia and Latin America have greatly benefited from is introduced in the early 2000s (Bair, 2005; Gereffi, Humphrey, & Sturgeon, 2003; Gereffi & Korzeniewicz, 1994) to designate the fragmentation of production process and trade between countries. It also explains why the benefits of economic integration fail to reach developing countries and their poor. This type of trade enables participating countries to enjoy a share of the value added of goods and services produced while previously participants unable to produce the goods and services were kept away. The extent of the participation of a country into the GVC is appreciated by dissociating the value added embodied in the products based on sources of origin and final destinations. Under this method, the literature (Lenzen, Moran, Kanemoto & Geschke, 2013) defines foreign value added (FVA) and domestic value added (DVA). The FVA known as backward integration is the share of the imported value added from foreign suppliers upstream that will be found in the country’s exports. This represents the country’s place in the value chain. The DVA is the sum of domestic value added of products directly consumed in the country where it is exported and the domestic value added of products that enter into the production of other countries’ exports. The share of exported domestic value added which will be reflected in the exports of other countries is known as forward integration. In the latter case, the country provides inputs for another country production. Combining backward and forward integration gives a measure of a country’s total GVC participation. In this context, World Economic Forum et al. (2015), Beck and Cull (2014), Taglioni and Winkler (2014), and AfDB et al. (2014), using descriptive statistics analyze the potential of GVC for Africa. Rashmi (2013) measures the participation of different countries in GVC and estimates distribution of gains between countries in terms of countries’ shares in total value added created by trade under GVC. Rashmi concludes that it is therefore important to ‘gainfully link into GVCs’ in identified industries where the country is able to derive net positive domestic value-added gains. United Nation Economic Commission for Africa (2016) examines the potential of North Africa in the integration of regional value chains and shows that industrialization is essential to realize effective structural transformation, and the development of regional value chains can be an important lever to overcome the challenges that arise in the region. If empirical studies on regional integration are numerous and very advanced, the empirical literature on the integration of value chains is very rare and even limited. The link between regional integration and trade is basically studied with Gravity models. Alemayehu and Haile (2002), Bayoumi and Eichengreen (1995), Evenett and Keller (2002), Matyas (1997), Wall (2000), Glick and Rose (2001) use gravity models to estimate the effect of regional integration on trade flows in Africa, Europe, or Latin America. It appears that regional integration has a positive effect on trade. Moral-Benito (2012) and International Monetary Fund (2015) discuss the relation between growth in GDP per capita in sub-Saharan African and trade openness. They find that increased trade openness and the improvement in terms of trade have accelerated per capita GDP growth in sub-Saharan Africa. Page 4 of 14 Tinta, Cogent Economics & Finance (2017), 5: 1389252 https://doi.org/10.1080/23322039.2017.1389252 However, this increased trade integration has also made the region more vulnerable to external shocks. International Monetary Fund (2015) analyzes the missing link in sub-Saharan Africa’s trade integration. By estimating gravity models covering 167 countries, the paper assesses the influence of geographical, institutional, and policy-related factors on bilateral trade flows. Gravity models should be used with caution. The use of aggregate data (Baldwin & Taglioni, 2006), the use of distance to capture transaction costs, the use of binary variables, Rose biases such as aggregation bias, auto-selection bias, and endogeneity bias (Lochard, 2005) are among the various critics formulated and need to be taken into account. Also, Plummer, Cheong and Hamanaka (2010) emphasize the importance of binary variables that can be correlated with other factors such as regional production shares, the distribution of the technology or intra-community travel which could be the real drivers of the increased intra-regional trade. The scarcity of econometric and empirical studies on GVCs integration is linked to the lack of trade input–output database on countries. It is only recently that databases have been built by OECD, UNCTAD and WTO using the methodology of Lenzen et al. (2013). However, the databases do not still include all countries because of missing information in some sectors. The few empirical studies are recent. International Monetary Fund (2015) examines the insertion in GVCs with an unbalanced panel for 185 countries by focusing mainly on the real GDP per capita effect on backward integration. The results show that for the entire sample real GDP per capita has a positive effect on backward integration but for the subsample of countries with GDP per capita at or below US$22,000 backward integration and income levels are negatively related. Kowalski, Ugarte, Ragoussis, and Lopez Gonzalez (2015) realize several estimations to analyze the effect of GVCs participation on domestic per capita value added and diversification of exports across a sample of 152 countries. According to recent studies (International Monetary Fund, 2015; Kowalski et al., 2015; OECD et al., 2014), structural factors and policy factors are identified as the key determinants of a country’s participation in GVC. The structural factors such as the market size or the level of development, degree of industrialization, and trade costs are based on the gravity theory of trade. The domestic market size is expected to be a strong determinant of the volume of GVC trade through the economic mass of trading partners (Anderson & van Wincoop, 2003; Evenett & Keller, 2002). The backward integration should develop with industrialization due to technological development and the emergence of a competitive services sector (Lopez-Gonzalez, 2012). The distance to manufacturing hubs measures the costs of selling in foreign markets and affects backward integration. Policy factors are based on institutional approach and indirectly are associated with foreign direct investment, intra-regional trade, suitability of preferential trade agreement and trade performance indicators that can affect the competitiveness of the entire value chain (Miroudot, Spinelli, & Rouzet, 2013). 3. Methodology 3.1. Data and descriptive statistics ECOWAS incudes fifteen countries such as Benin, Burkina Faso, Cape Verde, Côte d’Ivoire, Ghana, Gambia, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo and the data used for the estimation cover the period 1995–2012 for each country. OECD TiVA and EORA provides intercountry input–output data that allows to determine Domestic value added, foreign value added, backward insertion and forward insertion to GVC. The computation of backward and forward insertion use Lenzen et al. (2013) framework with Inter-Country Input-Output (ICIO) system. The input-output covers 187 individual countries with 172 crops and is classified in 26-sector harmonized in basic prices and purchasers’ prices. Table 1 contains for each country, primary input and final demand blocks, imports and exports itemized by partner. DVA = ∑ V c W c EXGR c,p,i FVA = ∑ V c W c EXGR c,i Page 5 of 14 Tinta, Cogent Economics & Finance (2017), 5: 1389252 https://doi.org/10.1080/23322039.2017.1389252 where DVA is the domestic value added in goods which captures value chains performance associated with exports of goods which accrue to domestic labor and capital; FVA is the foreign value added in goods and is related to the production and export of more-sophisticated goods; EXGRc,i represent Country c’s total gross exports for a given industry i; EXGRc,p,i represents gross exports of intermediate goods and services from domestic industry i in country c to country p. With global Leontief inverse W=(I−A)−1 , Value added to output ratio V = VAL/PROD, VAL = value added by industry and country; PROD = Gross output by industry and countryInput coefficients, calculated as Aij =Zij∕PRODj Backward integration is defined as the portion of the imported value added from foreign suppliers that will be part of the nation’s exports. Backward integration targets the country export competitivity. An increase in backward integration means an increase in FVA which involves that the country’s exports are highly sophisticated. Therefore, an increase in backward integration is associated with higher per capita domestic value-added in exports and increasing income. A higher share of backward participation is also linked to access of competitive inputs and a more-sophisticated export bundle and greater diversification of exports over time (AfDB et al., 2014). Furthermore, backward integration addresses the demand side of value chains in terms of foreign sourcing. We choose as trade performance indicators complementarity index in products, similarity index, diversification and concentration index. The computation of the indicators based on UNCTAD data depends on the numbers of products exported by the country. For ECOWAS countries, the number of products varies between 9 for Guinea-Bissau and 168 for Nigeria. The total number of products in the world is 261. Trade complementarity index denoted Cp shows how well the structure of a country’s Backward indicator =B=FVA∕(DVA +FVA) Trade openness =L= Total import + Total export GDP Intra −regional trade =I= Country � s Export in ECOWAS Total Export Table 1. Panel unit root tests results Common unit root process Individual unit root process Levin, Lin & Chu t-stat Im, Pesaran and Shin W-stat ADF - Fisher χ2PP - Fisher χ2 Statistic Prob. Statistic Prob. Statistic Prob. Statistic Prob. Openness (1st differences) −8.67593 0.0000 −8.22814 0.0000 107.198 0.0000 127.132 0.0000 Manufacturing value added −3.1262 0.0009 40.1662 0.0639 56.460 0.0011 Intra-community trade −2.53457 0.0056 0.46353 0.6785 22.3873 0.7631 29.712 0.3771 Domestic value added (1st differences) −5.97155 0.0000 87.7214 0.0000 101.46 0.0000 Complementarity index −2.84974 0.0022 −3.30902 0.0005 54.0375 0.0022 51.496 0.0044 Tariffs rate −15.8138 0.0000 −7.33126 0.0000 48.3783 0.0049 57.1579 0.0004 Diversification indices −5.79776 0.0000 −5.20552 0.0000 77.0805 0.0000 76.133 0.0000 Similarity in trade structures −5.21027 0.0000 −4.47447 0.0000 73.3900 0.0000 70.750 0.0000 Real GDP per capita (log) −1.85913 0.0315 −0.51043 0.3049 43.9010 0.0284 26.241 0.5598 Foreign direct investment −3.20278 0.0007 −3.93766 0.0000 59.5463 0.0005 65.130 0.0001 Backward (1st differences) −3.85097 0.0001 −4.31123 0.0000 77.8566 0.0000 87.502 0.0000 Page 6 of 14 Tinta, Cogent Economics & Finance (2017), 5: 1389252 https://doi.org/10.1080/23322039.2017.1389252 imports and exports match. It is based on the number of products traded by the country and assesses the suitability of preferential trade agreement. where xij is the share of good i in all exports of country j and mik is the share of good i in all imports of country k. The diversification of product trade denoted D also called Finger-Kreinin index assesses the absolute deviation of the trade structure of a country from world structure. A value closer to 1 indicates greater divergence from the world pattern. where hi is the share of product i in total world exports and hij is share of product i in total exports of country j. The similarity index denoted S measures the extent to which two countries export the same products. It assesses trade competitiveness or the degree of sophistication in products. where Xij is the value of exports for country j and product i. A descriptive analysis of the data helps to examine the implications of the regional economic integration of West African States. Intra-community trade (Figure 1) within ECOWAS is low. In 2014, intracommunity exports are estimated at 8.9 against 13% for MERCOSUR (Southern Common Market), 18.3% for EAC (East African Community), 19.3% for SADC (Southern African Development Community), and 25.3% for ASEAN (Association of Southeast Asian Nations). If ECOWAS countries trade more with external partners than with their neighbors, this is related to the lack of interdependence among different economies. The establishment of a chain in the production process from upstream to downstream can make each country become more attractive and a key destination, which will amplify intra-community trade. Cp =100 ⎛⎜⎜⎝ 1− �⎛⎜⎜⎝��� mik −xij ��� 2 ⎞⎟⎟⎠⎞⎟⎟⎠ D = ∑ i (hij −hi)∕ 2 S = ⎛⎜⎜⎜⎝ � � � � � � i � Xij Xj � 2 − � 1 n ⎞⎟⎟⎟⎠�� 1− � 1 n � Figure 1. Intra-Community trade of selected integration in percentage. Source: Author, based on IMF and UNCTAD data, 2017. Notes: ASEAN (Association of Southeast Asian Nations) ECOWAS (Economic Community of West African States) MERCOSUR (Southern Common Market) SADC (Southern African Development Community) EAC (East African Community). Page 7 of 14 Tinta, Cogent Economics & Finance (2017), 5: 1389252 https://doi.org/10.1080/23322039.2017.1389252 The place of ECOWAS in trade value chains is exposed in Figure 2. The domestic value added of ECOWAS exports is very low. A small part of domestic value added (60 million US dollars) is exported to other countries. This result confirms that downstream integration probably is related to primary products. The forward integration of ASEAN is very strong, the domestic value added being high. We also note that foreign value added in ASEAN is close to the domestic value added, reflecting intense competitiveness in exports and a dominant position in the GVC. On the contrary, for ECOWAS and SADC, foreign value added is very low compared to the domestic value added. This result confirms the assertions that the insertion of Africa in the GVC is carried further downstream. Integration in the value chain within ECOWAS may be an initial support for implementing a production system based on a process of transformation in different countries. The evolution of domestic value added and foreign value added within ECOWAS from 1990 to 2012 shows that the backward integration is stagnant compared to forward integration. Therefore, little effort has been done by ECOWAS countries to implement manufacturing structures. Within the area, the focus has been on the exploitation of raw materials or export of primary products. The lack of industrial development program explains the lack of export of manufactured goods, justifying why the foreign value added has marginally increased from 1990 to 2012 (Figure 3). Within ECOWAS, only Nigeria, Ghana, and the Ivory Coast are more involved in the value-added chain. For other countries, foreign or domestic value added is very low. Figure 4 illustrates the challenge that integration must overcome and shows the urgency of industrial development for West Africa to actively participate in world trade. The establishment of a regional value chain is a way for ECOWAS to expand its participation in the GVC and indirectly improve the economic performance of each country. Figure 2. Selected integration, domestic and foreign value added in US dollars. Source: Author, based on OECD TiVA and EORA data, 2016. Notes: ASEAN (Association of Southeast Asian Nations) ECOWAS (Economic Community of West African States) SADC (Southern African Development Community). Figure 3. ECOWAS domestic and foreign value added in US dollars. Source: Author, based on OECD TiVA and EORA data, 2016. Page 8 of 14 Tinta, Cogent Economics & Finance (2017), 5: 1389252 https://doi.org/10.1080/23322039.2017.1389252 3.2. Model specification We estimate two separate equations based on the objectives. To analyze whether an insertion to GVC is crucial in countries openness to international trade, the estimation method follows the relevant literature on theory of economic growth which suggests a Panel with fixed effects. Even if the link between openness and economic growth is ambiguous, the pattern of international trade suggests that the level of opening up for trade in a country depends on the level of national income, the distribution of gains and the economies of scale. Thus, new growth theories assume that trade openness through liberalization is explained by variability in growth rate of GDP and major trade policy variables determining growth process (Edwards, 1998; Kalu, Nwude, & Nnenna, 2016; Nadeem, Muhammad, Namatullah, Muhammad, & Faiz, 2011). Therefore, the dependent variable is trade openness and trade policy variables including tariff rates are explanatory variables. The estimation might be biased by the presence of time specific omitted factors affecting both the dependent and the explanatory variables. Therefore, we include year fixed effect. Based on literature, we control for the insertion to GVC, measured by backward integration but lagged to address endogeneity issues. Other exogenous variables such as intra-regional trade, the level of development proxied by GDP per capita, tariff rates, foreign direct investment inflows in GDP and lagged per capita domestic value added which captures value chains performance associated with exporting which accrue to domestic labor and capital. The empirical model can be broadly specified as follows: To analyze the determinants which indirectly affect GVC performance, we use the recent development of gravity model of trade (Choi, 2013; Noguera, 2012). Using this approach, the specification links backward integration as dependent variable to structural factors and policy-related factors such as intra-regional trade, foreign direct investment, the level of industrialization, the level of development, per capita domestic value added, diversification in goods, product complementarity, sophistication in goods and applied average tariffs. As previously mentioned, we include both country and year fixed effects to reduce any concern of omitted variable problem. Based on Anderson and van Wincoop (2003) and Baldwin (2006) critics, dummy and time constant variables and geographical parameters are not included in the model. The empirical specification can be summarized in the following equation: With Iit intra-community export trade, Dit diversification index as a proxy of competitiveness and quality of integration with worldwide markets, Sit similarity index which measures the degree of specialization in the production, Cpit complementarity, dvit per capita domestic value added in lagged value to reduce simultaneity bias with backward integration, GDPit real per capita GDP in logarithm, Mit share of manufacturing value added in GDP as a proxy of the level of industrialization, Fdiit foreign direct investment inflows in GDP, Bit backward integration which is linked to the production of moresophisticated export and Tit tariffs. (1) Lit =𝛿 0 +𝛿 1Iit +𝛿 2dvit +𝛿 3GDPit +𝛿 4Bit +𝛿 5Tit +𝛿 6Fdiit +𝛿 i +𝛿 t +𝜀 it (2) Bit = 𝜑 0+ 𝜑 2Iit + 𝜑 1Tit + 𝜑 4Dit + 𝜑 5Sit + 𝜑 6Cpit + 𝜑 7dvit + 𝜑 8GDPit + 𝜑 9Mit + 𝜑 i+ 𝜑 t+ 𝜑 10Fdiit + 𝜇 it Figure 4. ECOWAS countries domestic and foreign value added, 2012. Source: Author, based on OECD TiVA and EORA data, 2016.