Foreign Aid as Soft Power and Intra-African Trade: Evidence from Ghana Using Instrumental-Variable Gravity Models

Foreign Aid as Soft Power and Intra-African Trade: Evidence from Ghana Using Instrumental-Variable Gravity Models | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Foreign Aid as Soft Power and Intra-African Trade: Evidence from Ghana Using Instrumental-Variable Gravity Models Wisdom Agape Newman (PhD), Prof. Lord Mawuko-Yevugah (PhD) This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-8600559/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract Africa’s intra-regional trade remains the weakest among global trading blocs, accounting for less than 18% of total trade, despite decades of integration efforts and the establishment of the African Continental Free Trade Area (AfCFTA). While structural factors are often cited, the role of foreign aid as a form of soft power in shaping trade orientation remains underexplored. This study examines whether donor aid facilitates or constrains intra-African trade, focusing on Ghana as a strategic hub. Conceptually, trade is framed as a strategic coordination problem using a Prisoner’s Dilemma lens, where states weigh cooperation with regional partners against alignment with external donors. Empirically, we employ an extended gravity model with instrumental-variable estimation (2SLS and IV-GMM) on bilateral trade flows between Ghana and 34 African aid-recipient countries from 1996 to 2020. Results reveal that, when aid is directed toward trade-relevant public goods such as infrastructure, logistics, and customs modernization, it enhances intra-African trade intensity. Conversely, aid narrowly aligned with donor-market interests does not yield similar gains. These findings refine prevailing narratives that aid undermines African regional integration, highlighting its conditional and context-specific effects. Policy implications emphasize the alignment of donor financing with regional trade facilitation objectives to strengthen AfCFTA implementation and promote sustainable, coordinated intra-African trade. International Economics Macroeconomics Other Public Policy Intra-African trade foreign aid soft power game theory Prisoner’s Dilemma gravity model regional integration. Full Text Additional Declarations The authors declare no competing interests. Supplementary Files StatementsandDeclarations.docx Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. 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Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-8600559","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":574467168,"identity":"7c9bb183-3168-4990-a9ac-f4f2abe33980","order_by":0,"name":"Wisdom Agape Newman (PhD)","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAAA+ElEQVRIie3RsUvDQBTH8d9x4C1PuiaI/g0HQqEgvX8lJeCUQHcHnZol4Oyf4RIyBt+QJShulS4WoZNLEUE3z6To5CWj0PtOx3Gf4d0DfL7/mAQC4Kw9V91VBIirXnIOGk7QEm4JBhFdq/VymzwYA/V491ROMVKJFu+lgzCdTm6K1SwHzTltYoT5q5bHzd9kzHRwdFisIgJFnC4k9DLRMly4iNpYcm925BKmn2BsSSVyqMoShg7sLFsHMd0s8Sxngp2lpqDZzFk4SHhd2x8rpkZl2ctbWl6cjLL4dv3pIL9J0t/raPfD1Pe6Sz3/bFB8DCM+n8+3H30BKHdRvYso9/oAAAAASUVORK5CYII=","orcid":"https://orcid.org/0009-0000-5815-7447","institution":"Ghana Institute of Management and Public Administration","correspondingAuthor":true,"prefix":"","firstName":"Wisdom","middleName":"Agape","lastName":"Newman","suffix":"PhD"},{"id":574467169,"identity":"c26cf881-7da1-4053-8325-d605d705cbe6","order_by":1,"name":"Prof. Lord Mawuko-Yevugah (PhD)","email":"","orcid":"https://orcid.org/0000-0002-4507-1043","institution":"Ghana Institute of Management and Public Administration","correspondingAuthor":false,"prefix":"","firstName":"Prof.","middleName":"Lord","lastName":"Mawuko-Yevugah","suffix":"PhD"}],"badges":[],"createdAt":"2026-01-14 10:17:55","currentVersionCode":1,"declarations":{"humanSubjects":false,"vertebrateSubjects":false,"conflictsOfInterestStatement":false,"humanSubjectEthicalGuidelines":false,"humanSubjectConsent":false,"humanSubjectClinicalTrial":false,"humanSubjectCaseReport":false,"vertebrateSubjectEthicalGuidelines":false},"doi":"10.21203/rs.3.rs-8600559/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-8600559/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":101297835,"identity":"72dc86fe-bea6-410d-88a6-69b8dbfb3ef5","added_by":"auto","created_at":"2026-01-28 09:28:58","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":447404,"visible":true,"origin":"","legend":"","description":"","filename":"2.ManuscriptAnonymised.pdf","url":"https://assets-eu.researchsquare.com/files/rs-8600559/v1_covered_da7e3af9-0af2-4429-a9fc-c51550f269e7.pdf"},{"id":101248908,"identity":"601c40ee-430a-4c3d-84d9-1742d5da2d97","added_by":"auto","created_at":"2026-01-27 17:10:49","extension":"docx","order_by":1,"title":"","display":"","copyAsset":false,"role":"supplement","size":30608,"visible":true,"origin":"","legend":"","description":"","filename":"StatementsandDeclarations.docx","url":"https://assets-eu.researchsquare.com/files/rs-8600559/v1/0c9cfe1a76503b732e21d7c0.docx"}],"financialInterests":"The authors declare no competing interests.","formattedTitle":"\u003cp\u003e\u003cstrong\u003eForeign Aid as Soft Power and Intra-African Trade: Evidence from Ghana Using Instrumental-Variable Gravity Models\u003c/strong\u003e\u003c/p\u003e","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":true,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"Intra-African trade, foreign aid, soft power, game theory, Prisoner’s Dilemma, gravity model, regional integration.","lastPublishedDoi":"10.21203/rs.3.rs-8600559/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-8600559/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eAfrica’s intra-regional trade remains the weakest among global trading blocs, accounting for less than 18% of total trade, despite decades of integration efforts and the establishment of the African Continental Free Trade Area (AfCFTA). 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