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The Impact of Special Economic Zones on Economic Development: Evidence from Nightlight Analysis in the Lao People’s Democratic Republic

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  • NILAPHY PHOMMACHANH

    (Graduate School of International Development, Nagoya University, Nagoya, Japan)

Abstract

Over the past few decades, special economic zones (SEZs) have become a widely used industrial policy tool to support structural transformation and economic development. Yet their impact on the economy remains inconclusive, especially in developing countries where the lack of data presents a challenge. This study examines the potentially causal effect of SEZs on the economy of the Lao People’s Democratic Republic using harmonized nightlight satellite data as a proxy for annual economic activity in 148 districts from 1992 to 2021. Using counterfactual estimators for causal inference with time-series, cross-sectional data, SEZ establishment appears to result in a statistically significant increase in the economic activity of the host districts. Heterogeneity tests show that (i) SEZs in the Lao People’s Democratic Republic seem to have had a greater impact on economic activity after 2010, coinciding with the establishment of dedicated SEZ agencies; and (ii) industrial zones appear to have a higher impact than tourism zones.

Suggested Citation

  • Nilaphy Phommachanh, 2024. "The Impact of Special Economic Zones on Economic Development: Evidence from Nightlight Analysis in the Lao People’s Democratic Republic," Asian Development Review (ADR), World Scientific Publishing Co. Pte. Ltd., vol. 41(02), pages 81-105, September.
    • Handle: RePEc:wsi:adrxxx:v:41:y:2024:i:02:n:s0116110524400109
    DOI: 10.1142/S0116110524400109
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    More about this item

    Keywords

    causal inference; counterfactual estimators for causal inference with time-series; cross-sectional data; Lao People’s Democratic Republic; nighttime lights; special economic zone;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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