Working Paper: CEPR ID: DP17977
Authors: Susanne Frick; Andrés Rodríguez-Pose
Abstract: Special Economic Zones (SEZs) are a popular policy tool for the promotion of economic development. However, questions remain about their economic contribution and about what aspects of SEZ policies are most relevant to investors. This article sheds light on these issues by comparing SEZs across Africa, Asia and Latin America. We find that, while investment decisions by foreign companies are driven by market access, political stability and low labour costs, adequate SEZ policies facilitate the attraction of investment. A good industrial infrastructure together with a strategic location and service provision within the zones draw investment. Fiscal incentives, by contrast, have a limited influence on investment decisions.
Keywords: Special Economic Zones; Inward Investment; Industrial Policy; Developing Countries; FDI; Location Decision
JEL Codes: F21; O14; O24; L52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| SEZ policies (R38) | investment attraction (F21) |
| market access, political stability, low labor costs (R38) | investment decisions (G11) |
| SEZ policies (R38) | investment decisions (G11) |
| quality of SEZ policies (R38) | investment outcomes (G11) |
| fiscal incentives (H32) | investment decisions (G11) |
| government support, infrastructure availability (R53) | investment decision (G11) |