Digital Connectedness and Exports Upgrading: Is SubSaharan Africa Catching Up?

In this paper, we highlight a new dimension of the submarine cable infrastructure network, termed ‘digital connectedness’, reflecting a country's digital proximity to main world markets, and assess its impact on export upgrading. Adopting an instrumental variables approach conducted in a sample of 60 developing countries― including 23 sub-Saharan African countries―over the period 1995‒2017, we find that digital connectedness positively and significantly contributes to the export basket complexity, but also points out spatial heterogeneity within our sample. In fact, estimations stress that, compared to the Rest of the World, a 10pp increase in the share of world GDP directly cabled to SSA countries leads to a supplementary increase ranging from 4.6 index points to 5.3 index points in the export complexity index. Moreover, whereas the positive effect of digital connectedness falloffs with distance from global markets everywhere else, in sub-Saharan Africa, an increased benefit is recorded. Last but not least, consistent with the literature improved digital connectedness also materializes into greater exports of differentiated goods and greater participation in the global value chain. Overall, our analysis gives credit to the belief that improved access to information and knowledge, through greater digital connectedness, spurs structural change and export basket upgrading in SSA at a higher pace than in any other developing areas.

Cariolle J., da Piedade C. (2022)  Digital Connectedness and Exports Upgrading: Is SubSaharan Africa Catching Up? AERC Working Paper GVC-005, 62 p.