The Economic Impact Of Special Economic Zones

We estimate the development effect of the establishment of Special Economic Zones(SEZs) in China using a panel of 213 Chinese cities from 1978 to 2012. Specifically, we attempt to answer the following questions:how high is this growth effect, do the reform cities have a linear trend break, is there a self-selection problem among those SEZs, what’s the difference of the growth effects in different periods as well as in different types. Controlling for the population and area of the cities as well as the interaction between province and time, the results from our baseline regression suggest that the establishment of a state-level zone led to an increase in the level of GDP around 16%, but did not lead to a permanently steeper growth path. We overcome the self-selection problem by grouping the sample cities and observing the pre-reform economic performance. We also find that the effects of the later SEZs are less obvious. Just like the establishment of Shanghai Pilot Free Trade Zone in 2013, different types of SEZs play different roles in different periods.