Formation of SEZ, Welfare and Agricultural Productivity in a Developing Economy

Abstract:     
Formation of SEZ using agricultural land with a view to promote industrialization has recently been one of most controversial policy issues in many developing economies including India. This paper theoretically evaluates the consequences of this policy on a developing economy in terms of a three-sector, full-employment, general equilibrium model. It finds that agriculture and SEZ can grow simultaneously provided the government spends more than a critical amount of resources on irrigation projects and other infrastructural development designed at improving the efficiency of land. Agricultural wage and social welfare may also improve owing to such a policy.

Keywords: Special economic zone, fiscal concessions, agricultural productivity, competitive wage, social welfare

JEL Classification: R13, R14, H54

working papers series