Exports Promotion Policies for African Manufacturing Firms : Does electricity infrastructure matter more than exchange rate undervaluation ?

This paper studies the effects of power outages and exchange rate undervaluation on the allocation of manufacturing firms between the domestic and the exports market. I apply the instrumental variables approach to a sample of 12,062 manufacturing firms operating in 33 sub-Saharan African countries. The main results show that a 1% increase in the length of power outages reduces the share of exports in total sales by 0.939 percentage points. An undervaluation of 1% leads to an increase in the share of exports by 0.540 percentage points. The collateral damage effects show a negative impact of power outages and exchange rate undervaluation on the share of foreign inputs and a positive effect on the share of domestic inputs in the total purchase of inputs. Moreover, power outages and exchange rate undervaluation affect more the share of exports of firms in countries with low access to electricity, non-innovative firms, firms making less self-generation and firms operating in non-resource-rich countries. The robustness check indicates that the access to electricity and the exchange rate (undervaluation and depreciation) are substitutes. Indeed, a 1% improvement in electricity access per population reduces the positive impact of exchange rate undervaluation and depreciation on the share of exports by 0.172 and 0.583 percentage points, respectively.