Spatial economics in East Africa: three essays on conflict, local trade and regional market integration

This thesis investigates the spatial economic impact of conflict and regional market integration in East Africa - two forces that have left a major imprint on the region's overall economic progress during the last two decades. The first chapter examines the nexus between conflict and local cross-border trade along the border between Uganda and the DRC. Applying an instrumental variable approach to identify results, this chapter shows that conflict levels in the DRC are a strong predictor of declines in local trade volumes between Uganda and the DRC. Once the conflict ends, however, trade recovers relatively quickly. The second chapter expands on this finding. Using a violent insurrection in the DRC in 2012 as a natural experiment, it asks how this conflict disrupted the consumer welfare of communities living in neighbouring Uganda. Results are consistent with the occurrence of two separate shocks that mediated the impact of the conflict on Ugandan households. Households living near the border and thus exposed to conflict through trade linkages experienced a decline in living costs due to Uganda's trade surplus with the eastern DRC. In contrast, households living near refugee camps and thus exposed to the conflict through the arrival of refugees experienced an increase in living costs. These effects were highly localized and hardly noticeable outside Uganda's South-West, i.e. the region nearest to the conflict. The third chapter then turns to the spatial effects of regional trade liberalisation on economic activity in cities across East Africa after the launch of the East African Community in 2001 between Kenya, Tanzania, and Uganda. Measuring city growth using satellite imagery of lights emanating from Earth at night, cities close to the community's internal borders are found to experience a temporary growth effect lasting four years. Effects are shown to be consistent with an asymmetric reduction in trade costs for two types of trade modalities that co-exist in many parts of sub-Saharan Africa, local small-scale trade and regional large-scale trade, with a larger reduction in costs for the former.