Special economic zones and growth in China and India: an empirical investigation

Abstract

This paper investigates the role of special economic zones (SEZs) in liberalizing the Chinese and Indian economies and their impact on economic growth. The policy change to a more liberalized economy is identified using SEZ variables as instrumental variables. The results indicate that export and FDI growth have positive and statistically significant effects on economic growth in these countries. The presence of SEZs increases regional growth but increasing the number of SEZs has negligible effect on growth. The key to faster economic growth appears to be a greater pace of liberalization.

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Acknowledgements

I am grateful to Yothin Jinjarak and Jinyu for their help on the data sources. I would like to thank Kang Chen, Rajeh Mehta, conference and seminar participants at the DEGIT conference, the University of Melbourne, Singapore Economic Review Conference and Nanyang Technological University for their insightful comments and suggestions. I am deeply appreciative of the invaluable insights and suggestions of anonymous referees, which have improved the paper considerably.

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Correspondence to Chee Kian Leong.

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Leong, C.K. Special economic zones and growth in China and India: an empirical investigation. Int Econ Econ Policy 10, 549–567 (2013). https://doi.org/10.1007/s10368-012-0223-6

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Keywords

  • Special economic zones (SEZs)
  • Openness
  • Economic growth
  • Asia
  • China
  • India