A Dynamic Panel Analysis of Urbanization and Manufacturing Performance in ECOWAS Nations
This study examines the impact of urbanization on manufacturing performance across 15 ECOWAS member states from 2000 to 2023. Utilizing a System Generalized Method of Moments (GMM) estimator to address endogeneity and persistence, the research confronts the "manufacturing stagnation paradox" where rapid urban growth has not triggered traditional industrial expansion. The results reveal that while urbanization exerts a positive effect on manufacturing value added, the magnitude is modest and highly conditional. Specifically, a one percentage point increase in urban population share, associates with a 0.07 rise in manufacturing output. Findings indicate a nonlinear (inverted U-shaped) relationship, where benefits diminish beyond a 55–60% urbanization threshold due to congestion and infrastructure strain. Infrastructure and institutional quality emerge as critical mediators; their absence limits the realization of agglomeration economies. Conversely, trade openness remains statistically insignificant, suggesting weak integration into global value chains. The study concludes that urbanization in ECOWAS is a necessary but insufficient condition for structural transformation, necessitating coordinated industrial policies to move beyond "consumption cities.