Export-processing zones, multinational firms, and economic system transformation
This dissertation examines the implications of opening an export-processing zone (EPZ) in the process of economic system transformation in less-developed countries (LDCs). Studies to date have been conducted within standard international trade theory models and have reached conclusions incompatible with empirical observations. By combining three relevant areas of study--international trade theory, development economics, and multinational firm theory--we develop analytical frameworks within which we assess from both static and dynamic perspectives a variety of issues raised by the existence of an EPZ. The study focuses on the EPZ's role in the utilization of domestic abundant resources, labor in particular; and the EPZ's role in the promotion of export-led economic growth in host LDCs. We identify two types of linkages between the EPZ and the rest of the host economy (DZ): a vertical linkage through which the opening of the EPZ produces an induced employment effect on the labor market conditions in the DZ; and a horizontal linkage through which the host countries acquire advanced foreign technologies and promote exports. Characterizing the host LDCs as a dual economy, we analyze the EPZ's effects on domestic resource utilization through the vertical linkage in a static setting under alternative assumptions. The effects of the EPZ on the host country's export performance and economic growth through horizontal linkage are investigated by developing intertemporal models in which product differentiation is allowed; multinational firms' investment behavior is explicitly taken into consideration. We demonstrate that the establishment of an EPZ is an effective policy instrument in transforming an inward-looking, technology-backward, and labor-abundant economy to a more open and efficient structure. Given certain conditions, if the scale of foreign direct investment within an EPZ is large, and if the linkages between the EPZ and the DZ are strong, then the process of economic structural transformation is faster, and the host country is better off. Special Economic Zones established in China are discussed as a case study. Our analytical findings are consistent with, and supported by, the empirical observations obtained from the case of China.
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Dissertations available from ProQuest
Persistent link: https://www.econbiz.de/10009438548
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