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What draws investment to special economic zones? Lessons from developing countries

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  • Frick, Susanne
  • Rodríguez-Pose, Andrés

Abstract

Special Economic Zones (SEZs) are a popular policy tool for the promotion of economic development. However, questions remain about their economic contribution and about what aspects of SEZ policies are most relevant to investors. This article sheds light on these issues by comparing SEZs across Africa, Asia and Latin America. We find that, while investment decisions by foreign companies are driven by market access, political stability and low labour costs, adequate SEZ policies facilitate the attraction of investment. A good industrial infrastructure together with a strategic location and service provision within the zones draw investment. Fiscal incentives, by contrast, have a limited influence on investment decisions.

Suggested Citation

  • Frick, Susanne & Rodríguez-Pose, Andrés, 2023. "What draws investment to special economic zones? Lessons from developing countries," LSE Research Online Documents on Economics 118117, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:118117
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    More about this item

    Keywords

    special economic zones; inward investment; industrial policy; developing countries; foreign direct investment location decision;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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