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Place-based policies and firm performance: Evidence from Special Economic Zones in India

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  • Görg, Holger
  • Mulyukova, Alina

Abstract

This paper exploits time and geographic variation in the adoption of Special Economic Zones in India to assess the direct effects of the program on firm performance. We combine geocoded firm-level data and geocoded SEZs. Our analysis yields that conditional on controlling for initial selection based on observables, the establishment of new SEZs did not induce any discernible positive effect on the productivity growth of firms in the SEZs. To explain this, we focus on the possibility of distortions through non-profitable activities on the part of managers. We find that firms especially in publicly-owned SEZs decreased their productivity growth, while firms located in privately-owned SEZs experience productivity increases. We also show that directors of firms located inside the publicly-owned zones experienced a significant increase in their salary growth, which is not the case in privately-owned SEZs. Our findings are in line with the idea that the possibility of rent-seeking by managers leads to distortions in program implementation.

Suggested Citation

  • Görg, Holger & Mulyukova, Alina, 2024. "Place-based policies and firm performance: Evidence from Special Economic Zones in India," European Economic Review, Elsevier, vol. 165(C).
  • Handle: RePEc:eee:eecrev:v:165:y:2024:i:c:s0014292124000813
    DOI: 10.1016/j.euroecorev.2024.104752
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    More about this item

    Keywords

    Special Economic Zones; Firm performance; India;
    All these keywords.

    JEL classification:

    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • P25 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Urban, Rural, and Regional Economics
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F60 - International Economics - - Economic Impacts of Globalization - - - General

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