Author: Adeolu O. Adewuyi & Damilola F. Arawomo
Volume: 55 Issue No:3 Year:2013
Abstract: With a modified import demand framework, this study examines the role of institutions and product differentiation (PD) in the surge in imports into Nigeria from an emerging partner (China). The computed PD index shows that Chinese products imported by Nigeria are highly differentiated, and the degree of differentiation varies across sectors and sub-sectors. Empirical analysis shows that, beyond the traditional factors (income and prices), institutions and PD are major drivers of import surge, which produced both independent and joint effects. Results on the joint effect suggest that through PD, Chinese firms absorb the adverse effects of declining institution quality (such as waning level of compliance with law and order), and exploit the benefit of improved institution quality (such as better democratic accountability-choice freedom) in the importing nation to boost their sales. Some policy lessons were drawn for business and government.