Why Special Economic Zones? Using Trade Policy to Discriminate across Importers

Matthew Grant

American Economic Review, 2020, vol. 110, issue 5, 1540-71

Abstract: Tariffs are generally assumed to depend on the product, not the identity of the importer. However, special economic zones are a common, economically important policy used worldwide to lower tariffs on selected goods for selected manufacturers. I show this is motivated by policymakers' desire to discriminate across buyers when a tax is intended to raise prices for sellers, through a mechanism distinct from existing theories of optimal taxation. Using a new dataset compiled from public records and exogenous changes in imports of intermediate goods, I find the form, composition, and size of US zones are consistent with the theory.

JEL-codes: F13 F14 L60 R32 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1257/aer.20180384

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