The Impact of Special Economic Zones on Economic Development: Evidence from Nightlight Analysis in the Lao People’s Democratic Republic

Nilaphy Phommachanh
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Nilaphy Phommachanh: Graduate School of International Development, Nagoya University, Nagoya, Japan

Asian Development Review (ADR), 2024, vol. 41, issue 02, 81-105

Abstract: Over the past few decades, special economic zones (SEZs) have become a widely used industrial policy tool to support structural transformation and economic development. Yet their impact on the economy remains inconclusive, especially in developing countries where the lack of data presents a challenge. This study examines the potentially causal effect of SEZs on the economy of the Lao People’s Democratic Republic using harmonized nightlight satellite data as a proxy for annual economic activity in 148 districts from 1992 to 2021. Using counterfactual estimators for causal inference with time-series, cross-sectional data, SEZ establishment appears to result in a statistically significant increase in the economic activity of the host districts. Heterogeneity tests show that (i) SEZs in the Lao People’s Democratic Republic seem to have had a greater impact on economic activity after 2010, coinciding with the establishment of dedicated SEZ agencies; and (ii) industrial zones appear to have a higher impact than tourism zones.

Keywords: causal inference; counterfactual estimators for causal inference with time-series; cross-sectional data; Lao People’s Democratic Republic; nighttime lights; special economic zone (search for similar items in EconPapers)
JEL-codes: C22 O14 O25 R11 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:wsi:adrxxx:v:41:y:2024:i:02:n:s0116110524400109

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DOI: 10.1142/S0116110524400109

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