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Free Trade Zone of Manaus: An Impact Evaluation using the Synthetic Control Method

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  • Possebom, Vitor Augusto

Abstract

I apply the synthetic control method for Brazilian city-level data during the 20th Century in order to evaluate the economic impact of the Free Trade Zone of Manaus (FTZM). I find that this enterprise zone had positive significant effects on real GDP per capita and Services Total Production per capita, but it also had negative significant effects on Agriculture Total Production per capita. My results suggest that this subsidy policy achieved its goal of promoting regional economic growth at the cost of provoking mis-allocation of resources among economic sectors. They also reject the view that an industrialization policy will benefit all economic sectors due to positive spill-overs of the manufacture sector that are strong enough to compensate for the negative effect of the mis-allocation of resources.

Suggested Citation

  • Possebom, Vitor Augusto, 2017. "Free Trade Zone of Manaus: An Impact Evaluation using the Synthetic Control Method," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 71(2), July.
    • Handle: RePEc:fgv:epgrbe:v:71:y:2017:i:2:a:62251
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    References listed on IDEAS

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    6. Matias Busso & Jesse Gregory & Patrick Kline, 2013. "Assessing the Incidence and Efficiency of a Prominent Place Based Policy," American Economic Review, American Economic Association, vol. 103(2), pages 897-947, April.
    7. Marta Castilho & Marta Menéndez & Aude A. Sztulman, 2015. "Poverty and Inequality Dynamics in Manaus: Legacy of a Free Trade Zone?," Working Papers halshs-01245394, HAL.
    8. Abadie, Alberto & Diamond, Alexis & Hainmueller, Jens, 2010. "Synthetic Control Methods for Comparative Case Studies: Estimating the Effect of California’s Tobacco Control Program," Journal of the American Statistical Association, American Statistical Association, vol. 105(490), pages 493-505.
    9. Ham, John C. & Swenson, Charles & İmrohoroğlu, Ayşe & Song, Heonjae, 2011. "Government programs can improve local labor markets: Evidence from State Enterprise Zones, Federal Empowerment Zones and Federal Enterprise Community," Journal of Public Economics, Elsevier, vol. 95(7), pages 779-797.
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    Cited by:

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    3. Coelho dos Santos, Marcelo Bittencourt & Klotzle, Marcelo Cabus & Baptista Palazzi, Rafael, 2024. "The effect of oil discovery in Brazil: A synthetic control approach," Resources Policy, Elsevier, vol. 92(C).

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