Special Economic Zones in Developing And/Or Transition Economies: A Policy Proposal

11 Pages Posted: 27 Oct 2003

See all articles by Albert G. Schweinberger

Albert G. Schweinberger

University of Konstanz - Faculty of Economics and Statistics

Abstract

Making use of a global partitioning (disintegration) approach, a novel necessary and sufficient condition for the creation of Pareto-improving special economic zones is derived. It is shown that the establishment of a special economic zone may be desirable even if foreign investment has an immiserization effect. The present approach allows not only for the use of mobile but also immobile domestically owned factors in the special economic zone. Adopting a political economy perspective, multihousehold economies with without the feasibility of lump-sum compensation are modeled. It is shown that, subject to a certain condition, the setting up of special economic zones accompanied by appropriate tax policies results in an increase in government revenue. The latter may be used to finance much-needed investment in infrastructure or the production of public goods.

Suggested Citation

Schweinberger, Albert G., Special Economic Zones in Developing And/Or Transition Economies: A Policy Proposal. Available at SSRN: https://ssrn.com/abstract=450971

Albert G. Schweinberger (Contact Author)

University of Konstanz - Faculty of Economics and Statistics ( email )

Universitaetsstr. 10
78457 Konstanz
Germany
++49 7531 88-2632 (Phone)
++49 7531 88-4119 (Fax)

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