Finance

Emerging markets

Business

Archaeology

Special economic zone

Economic growth

Machine learning

Political science

Order (exchange)

China

Economics

Geography

Microeconomics

Economic impact analysis

Economic geography

Popularity

Proxy (statistics)

Computer science

Economic base analysis

Developing country

Transnational corporations

What is the impact of special economic zones (SEZs) in emerging countries on the economy of surrounding areas? Despite the popularity of SEZs as a policy tool in virtually all developing countries around the world, there is little evidence to date which systematically analyses this question. This paper sheds light on this topic by examining the economic growth spillovers generated by 346 SEZs in 22 emerging countries. The analysis uses night light data as a proxy for SEZ performance as well as the economic performance of the surrounding area in order to overcome the lack of reliable economic indicators when measuring SEZ performance. It also relies on a novel data set on SEZ characteristics in order to understand how far they impinge on the economic fortunes of the surrounding areas. The results indicate that SEZs have a positive impact on the economic performance of the areas surrounding the zones. However, the growth spillovers are limited in area and display a strong distance decay effect: the magnitude of the impact decreases continuously up to 50 km. Furthermore, zones located in more remote areas seem to have less of an impact on neighbouring areas. Moreover, factors assumed to have a facilitating effect, such as the manufacturing base in the country and political stability, do not seem to matter on a structural basis.

Are special economic zones in emerging countries a catalyst for the growth of surrounding areas?