Owusu Analyzes North–South Trade Dynamics in Africa’s Structural Transformation in New Study
A new study titled Structural Change in Africa: The Role of North–South and South–South Trade by Solomon Owusu, Assistant Professor of Global Economic Policy at the Pardee School, and co-authors Gideon Ndubuisi and Woubet Kassa, was published by The World Economy in early January 2026. The paper provides one of the most detailed examinations to date of how imported capital and intermediate goods influence structural change across African economies. Drawing on data from 52 countries between 2000 and 2022 and using a rigorous two‑stage least squares (2SLS) approach, the authors investigated whether the developmental impact of imported inputs depends on where they come from (the Global North or the Global South) and on the porous capacity of African economies. As the authors note, “growth‑enhancing structural change remains a central focus of economic policy across Africa,” yet many countries continue to face what the paper calls a “stalled structural transformation.”
A central finding of the study is the distinct advantage of inputs sourced from the Global South. The authors write that “imported inputs from the Global South exert an unambiguously positive effect on structural change,” due largely to the fact that these goods “are more aligned with the technological realities and production structures of African economies.” Notably, capital imports from emerging Global South economies such as China, India, and Turkey produce especially strong effects.
Conversely, inputs from the Global North, while often technologically advanced, require higher domestic readiness. As the study puts it, “the benefits of capital imports from the Global North materialise only when African economies possess high levels of domestic absorptive capacity.”
The paper also highlights striking differences in how absorptive capacity shapes outcomes. While stronger absorptive capacity amplifies the value of sophisticated Northern technologies, the authors find that it dampens the structural change effect of imports from the South. They explain: “South–South inputs may be especially effective in lower‑capacity environments… but may yield diminishing returns as absorptive capabilities expand.” This dynamic reflects what the study calls a potential “capability–input mismatch,” in which simpler technologies cease to generate transformational benefits once domestic firms become more advanced.
Taken together, the findings offer important guidance for policymakers. The authors conclude that “trade policy must move beyond simply expanding access to foreign inputs and focus on matching technological sources with domestic readiness.” In lower‑capacity contexts, affordable and adaptable technologies from the Global South may offer the most immediate gains. But as African countries seek deeper industrialization and technological upgrading, strategic investments in skills, innovation systems, and absorptive capacity will be essential to leverage the full potential of advanced inputs from the Global North. The study underscores that in an increasingly multipolar global economy, a nuanced and sequenced trade strategy is crucial for achieving the continent’s long‑sought structural transformation.
The full study can be accessed here.
Solomon Owusu is an Assistant Professor of Global Economic Policy at the Frederick S. Pardee School of Global Studies at Boston University and a Core Faculty Member of the Global China Initiative and the Global Economic Governance Initiative at the Global Development Policy Center. Before joining Boston University, he was a Postdoctoral Researcher at the Oxford Martin Program on the Future of Development at the University of Oxford. He also held a Research Economist position at the German Institute of Development and Sustainability in Bonn, Germany. He has worked with the World Bank, UNIDO, and Ghana Statistical Service and worked on projects for the European Commission and Asian Development Bank. He holds a Ph.D. in Economics from Maastricht University/UNU-MERIT in the Netherlands.