Are special economic zones products of corruption?

Abstract

PurposeThese zones offer participants a wide variety of incentives and can be found in sizes ranging from a few square acres to entire large cities. The diversity among SEZs presents an opportunity for new research.Design/methodology/approachSpecial economic zones (SEZs) have grown exponentially in popularity during the past few decades, in size and scope. They are often lauded as instruments central to enhancing economic growth in developing countries. However, the empirical evidence on the relationship between SEZs and growth is inconclusive.FindingsThe analysis concludes that corruption leads to the creation of smaller zones that are likely the products of rent-seeking.Originality/valueThe authors argue that SEZs can be effective vehicles for rent-seeking, especially geographically small zones and develop an empirical model to explore the relationship between zone size and the impetus for the zone creation, namely corruption. Specifically, the authors analyze whether these small zones are vehicles of economic growth or manifestations of country wide corruption.