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Free economic zones and firm performance: Evidence from Korea

Jung-Wook Kim and Jong-Wha Lee

KDI Journal of Economic Policy, 2025, vol. 47, issue 2, 81-97

Abstract: Policies involving what are known as Free Economic Zones (FEZs) have been popular among countries interested in attracting foreign investment. While foreign investment has generally benefited the receiving country, the effect of market rivalry is known to reverse this impact. Our paper tests, using listed and unlisted companies in Korea, whether the designation of a Korean FEZ affects firms in the region positively in terms of sales, profit, productivity, and export activities. We find that FEZ-designated firms outperform those in the other regions. However, the findings also suggest that the impact of FEZ designation takes years to unfold and that success requires consistent effort.

Keywords: Free Economic Zones; firm performance; sales; productivity (search for similar items in EconPapers)
JEL-codes: F43 H83 O18 O38 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:kdijep:320444

DOI: 10.23895/kdijep.2025.47.2.81

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KDI Journal of Economic Policy is currently edited by Dongseok Kim

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