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An Analysis of Optimal Size for a Special Economic Zone

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  • Sugata Marjit
  • Hamid Beladi

Abstract

We use a general equilibrium framework with training costs to characterize a special economic zone which uses foreign capital and local labor. Competitive equilibrium without government intervention leads to "overflow" of local labor in the foreign enclave. A sector-specific wage tax implements the "first-best" level of employment in the special economic zone, justifying active government intervention. Our result holds in the extended version of the basic model.

Suggested Citation

  • Sugata Marjit & Hamid Beladi, 1997. "An Analysis of Optimal Size for a Special Economic Zone," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 133(II), pages 153-164, June.
    • Handle: RePEc:ses:arsjes:1997-ii-3
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