Academic journal article E+M Ekonomie a Management

The Impact of Special Economic Zones on Export Behaviour. Evidence from Polish Firm-Level Data

Academic journal article E+M Ekonomie a Management

The Impact of Special Economic Zones on Export Behaviour. Evidence from Polish Firm-Level Data

Article excerpt

Introduction

The establishment of Special Economic Zones (SEZ), and other types of privileged areas, is a common policy approach adopted by countries in order to attract domestic and foreign capital, increase exports or employment, increase trade openness or facilitate minor economic transitions within the country. By setting a preferential business climate, with lower taxes and tariffs made available in a restricted territory, governments promote investment inflow and encourage flourishing businesses to grow and cluster within zones, thus generating positive spill-over effects to the neighbouring areas.

Despite various policy types and approaches to establishing privileged areas, SEZs' success varies, being influenced by their location and size, set of incentives provided, quality and/or availability of resources (capital and labour), infrastructure, political, law and institutional environment, as well as stability of the government (Dobronogov & Farole, 2012). In the wrong institutional framework, SEZs can lead to resource misallocation and rent-seeking, whereas in a proper setting, these can lead to economic development (Moberg, 2015). Therefore, the efficacy of SEZ-led programmes is controversial (Chaudhuri & Yabuuchi, 2010) and frequently questioned (Damborsky, Wokoun, & Krejcova, 2013), also as part of wider place-based policies (Neumark & Simpson, 2015).

Although SEZs operate in more than 158 countries in total (Siroen & Yucer, 2014) and significantly affect global trade flows (est. 851 bln USD, more than 40% of global exports) (FIAS, 2008), most of the empirical evidence on SEZs is focused on: (1) their role in the domestic economies, describing their contribution to the main country-level aggregates or (2) case studies of specific zones. The examples of selected works about SEZs' contribution in national exports include: Aggarwal (2004; 2005; 2012a; 2012b), Amirahmadi and Wu (1995), Brautigam and Xiaoyang (2011), Farole (2011), Farole and Akinci (2011), FIAS (2008), Ge (1999), Kumar (1989), Kundra (2000), McIntyre, Narula, and Trevino (1996), Milberg and Amengual (2008), Tantri (2011; 2012), Wong and Chu (1984), Zeng (2010; 2011; 2014). These include analysis conducted for Asian (China, India, Sri Lanka, Bangladesh, Honduras, Vietnam, Dominican Republic) and African countries (Egypt, Ghana, Kenya, Lesotho, Nigeria, Senegal, Tanzania).

The shortcomings of the research presented above are constituted by the lack of econometric methods being implemented, which forbids establishing a causal link between exports and SEZ operation. To our knowledge, the notable exceptions from this rule are the works of Johansson and Nilsson (1997), Wang (2013) and the working paper of Siroen and Yucer (2014). However, none of them investigates the firm-level consequences of operation in SEZs with regard to exports. They concentrate on international/national/regional implications for the zonal operation.

SEZs' operations are frequently criticised from a regional perspective. They can affect their vicinity by relocation of economic activity from outside of zones to their inside. It some of the cases, SEZs can also lead to an enclave effect, meaning the lack of cooperation with nearby local firms. Criticism is also done on micro-economic perspective (free-market disturbance). Notwithstanding the currently available body of literature, little is known about the primal objective of the SEZ operation, namely the promotion of exports (Siroen & Yucer, 2014). The insufficient amount of empirical evidence is especially noticeable in the area of firm-level analysis, which is vital in the context of Arm heterogeneity and new, new trade theory approaches. The operation in SEZs significantly affects Arms' balance sheets by providing an extra competitive advantage, which is usually an income tax exemption with a set of other incentives offered to investors (such as lower tariffs, reduced local taxes, etc. …

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