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The political economy of special economic zones

Published online by Cambridge University Press:  10 June 2014

LOTTA MOBERG
LOTTA MOBERG*
Affiliation:
Geroge Mason University, Fairfax, VA, USA
*
*Email: lmoberg2@gmu.edu
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Abstract

This paper is a first attempt to apply a robust political economy framework to explain when Special Economic Zones (SEZs) can contribute to economic development. A robust political economy is one that channels the actions of self-interested individuals with limited information to promote economic progress. In the right institutional context, SEZs tend to promote economic growth. In the wrong institutional context, they can cause resource misallocation and rent-seeking. Policy makers introducing SEZs must overcome the knowledge problem to avoid misdirected economic planning. Yet, the scheme can only fulfill its purpose if it also prevents destructive rent-seeking behavior, both from businesses and from government authorities. The political economy framework of SEZs can be applied to judge their potential efficacy, something that orthodox studies of country features such as natural resources, infrastructure, and zone location fail to do. The Indian and Chinese experiences with SEZs illustrate these points.

Type
Research Article
Information
Journal of Institutional Economics , Volume 11 , Issue 1 , March 2015 , pp. 167 - 190
Copyright
Copyright © Millennium Economics Ltd 2014 

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