Trade Openness and Economic Growth in West African Countries: Does Human Capital Matter?

Abstract

This study investigates the impact of human capital on the relationship between trade openness and economic growth in 13 West African countries from 1990 to 2023. It investigates whether differences in economic outcomes from trade openness arise due to varying levels of human capital. Using the panel threshold model developed by Hansen, the research identifies a critical threshold for human capital at 38.9090%, above which trade openness has a significantly positive impact on economic growth. Below this threshold, however, trade openness fails to produce meaningful economic growth benefits. These findings highlight that the successful transfer and utilisation of knowledge and technology through international trade depend critically on a country's absorptive capacity, driven primarily by the quality of its human capital. Consequently, the study recommends targeted policy reforms to improve human capital, suggesting increased governmental investment in education and training. By doing so, West African countries can effectively capitalise on the benefits of global trade integration, thereby promoting sustainable economic growth.