Relative Winners and Losers from Efficiency Spillovers in Africa with Policy Implications for Regional Integration


Studies that have analyzed the efficiency of developing countries have estimated
non-spatial frontier models. We extend this approach by accounting for spatial
dependence among African countries. In particular, we estimate a spatial Durbin
stochastic production frontier model. We also make novel use of the efficiency
scores from our spatial model to suggest a direction for regional integration policy
for Africa that policy makers can consider. A previous suggestion to promote
regional integration in Southern Africa has been to use South Africa as a regional
integration hub and to encourage other countries in the region to improve economic
links with the hub. We continue with this line of enquiry and although we conclude
that there are currently no African countries that are ideal candidates to be a
regional integration hub, we suggest three other countries that policy makers may
consider using as hubs in the future. We therefore suggest that it would be prudent
to consider implementing policies to expedite the readiness of these countries to act
as integration hubs.