IDEAS home Printed from https://ideas.repec.org/a/eee/wdevel/v107y2018icp396-409.html
   My bibliography  Save this article

Do special economic zones induce developmental spillovers? Evidence from India’s states

Author

Listed:
  • Alkon, Meir

Abstract

Do special economic zones induce local development? Research drawing on the case of China’s special economic zones suggests that subnational polities can target the location of export zones in order to catalyze local and regional socioeconomic development. Since 2006, a number of Indian states have pushed forward similar zones in the face of accusations of land grabbing, arguing that the zones will be engines for improvement in exports, employment, and infrastructure. I argue that local development spillovers are an important, albeit previously understudied, dimension by which to evaluate the effects of special economic zones. I then present the first systematic analysis of the developmental effects of India’s SEZs, leveraging an original dataset on their locations, together with 2001 and 2011 census data containing a host of social and economic developmental variables. The findings show these SEZs have failed to bring about local socioeconomic development. To explain this absence of developmental spillovers, I provide a theoretical framework based on the crucial role of political economy incentive structures facing local politicians. I outline the mechanism through which Indian state politicians use state-owned development corporations for rent capture, undermining the potential effectiveness of SEZs and leading to their developmental failures. The combination of available means for extracting rents and the limited political constraints on such rent extraction leads to a lack of developmental spillovers. This framework can also help to explain the difference in the effects of SEZs in India and in China. These findings have theoretical importance for understanding the conditions under which subnational polities can use export zones and other export policies to catalyze development, and practical implications for understanding the mixed pattern of SEZ success across the world.

Suggested Citation

  • Alkon, Meir, 2018. "Do special economic zones induce developmental spillovers? Evidence from India’s states," World Development, Elsevier, vol. 107(C), pages 396-409.
    • Handle: RePEc:eee:wdevel:v:107:y:2018:i:c:p:396-409
    DOI: 10.1016/j.worlddev.2018.02.028
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0305750X18300731
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.worlddev.2018.02.028?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Solé-Ollé, Albert & Sorribas-Navarro, Pilar, 2008. "The effects of partisan alignment on the allocation of intergovernmental transfers. Differences-in-differences estimates for Spain," Journal of Public Economics, Elsevier, vol. 92(12), pages 2302-2319, December.
    2. Lakshmi Iyer & Anandi Mani, 2012. "Traveling Agents: Political Change and Bureaucratic Turnover in India," The Review of Economics and Statistics, MIT Press, vol. 94(3), pages 723-739, August.
    3. Wendy Wolford & Saturnino M. Borras Jr. & Ruth Hall & Ian Scoones & Ben White & Michael Levien, 2013. "Regimes of Dispossession: From Steel Towns to Special Economic Zones," Development and Change, International Institute of Social Studies, vol. 44(2), pages 381-407, March.
    4. Aradhna Aggarwal, 2007. "Impact of Special Economic Zones on Employment, Poverty and Human Development," Working Papers id:1111, eSocialSciences.
    5. Chenggang Xu, 2011. "The Fundamental Institutions of China's Reforms and Development," Journal of Economic Literature, American Economic Association, vol. 49(4), pages 1076-1151, December.
    6. Sáez, Lawrence & Sinha, Aseema, 2010. "Political Cycles, Political Institutions and Public Expenditure in India, 1980–2000," British Journal of Political Science, Cambridge University Press, vol. 40(1), pages 91-113, January.
    7. Hunt Allcott & Allan Collard-Wexler & Stephen D. O'Connell, 2016. "How Do Electricity Shortages Affect Industry? Evidence from India," American Economic Review, American Economic Association, vol. 106(3), pages 587-624, March.
    8. Chee Leong, 2013. "Special economic zones and growth in China and India: an empirical investigation," International Economics and Economic Policy, Springer, vol. 10(4), pages 549-567, December.
    9. Michael Levien, 2013. "The Politics of Dispossession," Politics & Society, , vol. 41(3), pages 351-394, September.
    10. Levien, Michael, 2015. "Social Capital as Obstacle to Development: Brokering Land, Norms, and Trust in Rural India," World Development, Elsevier, vol. 74(C), pages 77-92.
    11. Enrico Moretti, 2014. "Local Economic Development, Agglomeration Economies, and the Big Push: 100 Years of Evidence from the Tennessee Valley Authority," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(1), pages 275-331.
    12. Wang, Jin, 2013. "The economic impact of Special Economic Zones: Evidence from Chinese municipalities," Journal of Development Economics, Elsevier, vol. 101(C), pages 133-147.
    13. Yogesh Uppal, 2009. "The disadvantaged incumbents: estimating incumbency effects in Indian state legislatures," Public Choice, Springer, vol. 138(1), pages 9-27, January.
    14. Cai, Hongbin & Treisman, Daniel, 2009. "Political Decentralization and Policy Experimentation," Quarterly Journal of Political Science, now publishers, vol. 4(1), pages 35-58, March.
    15. Sud, Nikita, 2014. "Governing India’s Land," World Development, Elsevier, vol. 60(C), pages 43-56.
    16. Aggarwal, Aradhna, 2012. "Social and Economic Impact of SEZs in India," OUP Catalogue, Oxford University Press, number 9780198077275.
    17. Moberg, Lotta, 2015. "The political economy of special economic zones," Journal of Institutional Economics, Cambridge University Press, vol. 11(1), pages 167-190, March.
    18. David Wall, 1993. "China's Economic Reform and Opening‐Up Process: The Role of the Special Economic Zones," Development Policy Review, Overseas Development Institute, vol. 11(3), pages 243-260, September.
    19. Lü, Xiaobo & Landry, Pierre F., 2014. "Show Me the Money: Interjurisdiction Political Competition and Fiscal Extraction in China," American Political Science Review, Cambridge University Press, vol. 108(3), pages 706-722, August.
    20. Hongbin Cai & Daniel Treisman, 2005. "Does Competition for Capital Discipline Governments? Decentralization, Globalization, and Public Policy," American Economic Review, American Economic Association, vol. 95(3), pages 817-830, June.
    21. Patrick Kline & Enrico Moretti, 2014. "People, Places, and Public Policy: Some Simple Welfare Economics of Local Economic Development Programs," Annual Review of Economics, Annual Reviews, vol. 6(1), pages 629-662, August.
    22. Shih, Victor & Adolph, Christopher & Liu, Mingxing, 2012. "Getting Ahead in the Communist Party: Explaining the Advancement of Central Committee Members in China," American Political Science Review, Cambridge University Press, vol. 106(1), pages 166-187, February.
    23. Zeng, Douglas Zhihua, 2011. "How do special economic zones and industrial clusters drive China's rapid development ?," Policy Research Working Paper Series 5583, The World Bank.
    24. Ho, Daniel E. & Imai, Kosuke & King, Gary & Stuart, Elizabeth A., 2007. "Matching as Nonparametric Preprocessing for Reducing Model Dependence in Parametric Causal Inference," Political Analysis, Cambridge University Press, vol. 15(3), pages 199-236, July.
    25. Simon Alder & Lin Shao & Fabrizio Zilibotti, 2016. "Economic reforms and industrial policy in a panel of Chinese cities," Journal of Economic Growth, Springer, vol. 21(4), pages 305-349, December.
    26. Triyakshana Seshadri, 2011. "Is the Path to Higher Exports in India Paved with Export Zones?," Journal of South Asian Development, , vol. 6(1), pages 25-41, April.
    27. Kosuke Imai & Marc Ratkovic, 2014. "Covariate balancing propensity score," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 76(1), pages 243-263, January.
    28. Aradhna Aggarwal, 2007. "Impact of Special Economic Zones on Employment, Poverty and Human Development," Indian Council for Research on International Economic Relations, New Delhi Working Papers 194, Indian Council for Research on International Economic Relations, New Delhi, India.
    29. Sam Asher & Paul Novosad, 2017. "Politics and Local Economic Growth: Evidence from India," American Economic Journal: Applied Economics, American Economic Association, vol. 9(1), pages 229-273, January.
    30. Thomas Farole & Gokhan Akinci, 2011. "Special Economic Zones : Progress, Emerging Challenges, and Future Directions," World Bank Publications - Books, The World Bank Group, number 2341.
    31. Wade, Robert, 1985. "The market for public office: Why the Indian state is not better at development," World Development, Elsevier, vol. 13(4), pages 467-497, April.
    32. Sheng,Yumin, 2010. "Economic Openness and Territorial Politics in China," Cambridge Books, Cambridge University Press, number 9780521195386, September.
    33. Gulzar, Saad & Pasquale, Benjamin J., 2017. "Politicians, Bureaucrats, and Development: Evidence from India," American Political Science Review, Cambridge University Press, vol. 111(1), pages 162-183, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kartik Misra, 2019. "Accumulation by Dispossession and Electoral Democracies : An Analysis of Land Acquisition for Special Economic Zones in India," UMASS Amherst Economics Working Papers 2019-16, University of Massachusetts Amherst, Department of Economics.
    2. 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).
    3. Gao, Ming & Gu, Qiankun & He, Shijun, 2022. "Place-based policies, administrative hierarchy, and city growth: Evidence from China," Economic Modelling, Elsevier, vol. 115(C).
    4. Marta Castilho & Marta Menéndez & Aude A. Sztulman, 2015. "Poverty and Inequality Dynamics in Manaus: Legacy of a Free Trade Zone?," Working Papers halshs-01245394, HAL.
    5. Khan, Karim, 2019. "Special Economic Zones (SEZs) and Prospects for the Domestic Economy of Pakistan," MPRA Paper 103337, University Library of Munich, Germany.
    6. Görg, Holger & Mulyukova, Alina, 2022. "Place-Based Policies and Agglomeration Economies: Firm-Level Evidence from Special Economic Zones in India," IZA Discussion Papers 15123, Institute of Labor Economics (IZA).
    7. Blakeslee, David & Chaurey, Ritam & Fishman, Ram & Malik, Samreen, 2018. "Structural Transformation and Spillovers from Industrial Areas," IZA Discussion Papers 11886, Institute of Labor Economics (IZA).
    8. Jia, Junxue & Ma, Guangrong & Qin, Cong & Wang, Liyan, 2020. "Place-based policies, state-led industrialisation, and regional development: Evidence from China's Great Western Development Programme," European Economic Review, Elsevier, vol. 123(C).
    9. Louisiana Cavalcanti Teixeira, 2020. "Labor standards and social conditions in free trade zones: the case of the Manaus free trade zone," Post-Print hal-02997102, HAL.
    10. Neumark, David & Simpson, Helen, 2015. "Place-Based Policies," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 1197-1287, Elsevier.
    11. Simon Alder & Lin Shao & Fabrizio Zilibotti, 2016. "Economic reforms and industrial policy in a panel of Chinese cities," Journal of Economic Growth, Springer, vol. 21(4), pages 305-349, December.
    12. Sina Hardaker, 2020. "Embedded Enclaves? Initial Implications of Development of Special Economic Zones in Myanmar," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 32(2), pages 404-430, April.
    13. Susanne Frick & Andrés Rodríguez-Pose, . "Are special economic zones in emerging countries a catalyst for the growth of surrounding areas?," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    14. Li, Daniel Z. & Zhang, Qi, 2018. "Policy choice and economic growth under factional politics: Evidence from a Chinese Province," China Economic Review, Elsevier, vol. 47(C), pages 12-26.
    15. Aradhna Aggarwal & Ari Kokko, 2021. "SEZs and poverty reduction: evidence from Andhra Pradesh, India," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 17(8), pages 1793-1814, January.
    16. Fabrizio Zilibotti, 2017. "Growing and Slowing Down Like China," Journal of the European Economic Association, European Economic Association, vol. 15(5), pages 943-988.
    17. World Bank Group, 2017. "Special Economic Zones," World Bank Publications - Reports 29054, The World Bank Group.
    18. Lotta Moberg & Vlad Tarko, 2021. "Special economic zones and liberalization avalanches," Journal of Entrepreneurship and Public Policy, Emerald Group Publishing Limited, vol. 10(1), pages 120-139, February.
    19. Shouwei Qi & Yating Chen & Kaili Chu, 2024. "Lifting the Veil: Using a Spatial Discontinuity to Assess the Impact of National Development Zones on Upgrading of Chinese Manufacturing," Open Economies Review, Springer, vol. 35(4), pages 855-886, September.
    20. Zhao, Chuanmin & Qu, Xi, 2024. "Place-based policies, rural employment, and intra-household resources allocation: Evidence from China’s economic zones," Journal of Development Economics, Elsevier, vol. 167(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:wdevel:v:107:y:2018:i:c:p:396-409. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/worlddev .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.