Trade Liberalization, Human Capital Development and Economic Growth in Sub- Saharan African (SSA) Countries
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Date
2025-12
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Lead City University, Ibadan
Abstract
This study investigates the effect of trade liberalization and human capital development on economic growth of Sub-Saharan African countries from 2000 to 2022. Cross-sectional and time series data on total trade to GDP ratio (TLIB), human capital development index, export, import, net foreign direct investment, gross capital formation, net migration, net official development assistance, population, labour force, government total expenditure on education, government total expenditure on health, primary school enrolment rate, secondary school enrolment rate, infant mortality rate, life expectancy rate and inflation rate obtained from World Development Indicators (WDI) were utilized for the study. Pooled Ordinary Least Squares (POLS), Fixed Effects Model (FEM) and Two Step Difference Generalized Method of Moments (TSDGMM)
were the econometric techniques employed in estimating the parameters of the four models developed for the study. Empirical findings for (Model 1) revealed that trade liberalization has a statistically significant positive impact on human capital development. Imports and gross capital formation variables exerted statistically significant positive impacts while net foreign direct investment, net migration and net official development assistance influenced human capital development positively but insignificant. The empirical results for (Model 2) showed that trade liberalization has statistically significant positive effect on economic growth of SSA countries. Exports, net foreign direct investment and population impacted economic growth positively and significantly while import, gross capital formation and labour force had negative contributions. Moreover, the empirical results for (Model 3) indicated that human capital development has a statistically significant positive impact on economic growth of SSA countries. Other explanatory variables of the model influenced economic growth negatively and significantly with the exception of secondary school enrolment rate that had significant positive impact. The results for (Model 4) showed that the interactive effect of trade liberalization and human capital development on economic growth for SSA countries was negative and statistically significant. Government total expenditure on education, government total expenditure on health, exports and imports had negative and significant influence on economic growth while gross capital formation, labour force, secondary school enrolment rate and infant mortality rate made insignificant positive contributions. Other independent variables of the model like net foreign direct investment, primary school enrolment rate and life expectancy rate influenced economic growth positively and significantly. Based on the estimated results, governments of Sub-Saharan African countries should invest massively in education and skills development, particularly in areas related to the needs of a more open and globally integrated economy; there should be implementation of complementary policies that address potential challenges and enhance the benefits of trade liberalization like strengthening of domestic revenue mobilization, investing in
infrastructure, and providing targeted support for small and medium enterprises (SMEs) to mitigate the negative impacts of increased competition; and there should also be prioritization of investments in quality education and skills development. In addition, governments should also prioritize trade liberalization alongside investments in quality education and skills development; and finally massive investments should be made in trade infrastructure and technology to reduce logistic costs, enhance trade efficiency and promote regional connectivity.
Keywords: Trade liberalization, human capital development, economic growth, generalized method of moments, Sub-Saharan Africa
Word Count: 490
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Keywords
Trade liberalization, human capital development, economic growth, generalized method of moments, Sub-Saharan Africa.
Citation
kate Turabian