Special economic zones and liberalization avalanches

Lotta Moberg and Vlad Tarko

Journal of Entrepreneurship and Public Policy, 2021, vol. 10, issue 1, 120-139

Abstract: Purpose - The purpose of this study is to show under what conditions a special economic zone will succeed at spurring development and at sparking broader liberalization. Design/methodology/approach - The authors use a combination of formal modeling and case studies. Findings - Most special economic zones fail because of rent-seeking. Successful zones create positive economic and political externalities to other regions. Credible reforms are associated with turning the opposition to the zones into supporters, as a consequence to the positive externalities. Originality/value - The authors add heterogeneity to the model of political elite dynamics, which leads to significant enhancements of the model and removes the pro-centralization bias of the Blanchard and Shleifer's (2001) model. They also criticize Weingast's federalism model as applied to China. Success of China is explained by a different mechanism, which we put forth in this paper.

Keywords: Federalism; Rent-seeking; Economic reform; China; Political entrepreneurship (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:jepppp:jepp-01-2021-0008

DOI: 10.1108/JEPP-01-2021-0008

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