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Special Economic Zones in Panama: Technology Spillovers from a Labor Market Perspective

Listed author(s):
  • Ricardo Hausmann

    ()

    (Center for International Development at Harvard University)

  • Juan Obach

    ()

    (Center for International Development at Harvard University)

  • Miguel Angel Santos

    ()

    (Center for International Development at Harvard University)

Special Economic Zones (SEZ) have played an important role in Panama's successful growth story over the previous decade. SEZ have attracted local and foreign investment by leveraging a business-friendly environment of low transaction costs, and created many stable, well-paid jobs for Panamanians. Beyond that, SEZ shall be assessed as place-based policy by their capacity to boost structural transformations, namely attracting new skills and more complex know-how not to be found in the domestic economy. The aim of this paper is to evaluate the three largest SEZ in Panama: Colon Free Zone Panama-Pacific City of Knowledge Our results suggest that SEZ have been successful as measured by static indicators, such as foreign investment, job creation and productivity. We also find that SEZ have boosted inflows of high-skill immigrants, who are most likely generating positive knowledge spillovers on Panamanians productivity and wages. However, significant legal instruments and institutional designs are preventing Panama from taking full advantage of the skill variety hosted at the SEZ. Complex immigration processes inhibiting foreigners from transitioning out of the SEZ, a long list of restricted professions and even citizenships considered as a national security concern, are hindering the flow of knowledge, keeping the benefits coming from more complex multinational companies locked inside the gates of SEZ.

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File URL: http://growthlab.cid.harvard.edu/files/growthlab/files/sez_panama_wp_326.pdf
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Paper provided by Center for International Development at Harvard University in its series CID Working Papers with number 326.

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Date of creation: Oct 2016
Handle: RePEc:cid:wpfacu:326
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