Why Special Economic Zones? Using Trade Policy to Discriminate across Importers
American Economic Review · 2020 · Volume 110 · Issue 5
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.
Keywords
Trade Policy, International Trade Organizations, Empirical Studies of Trade, Industry Studies: Manufacturing: General, Other Spatial Production and Pricing Analysis
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