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Poland’s Special Economic Zones: Effects on Regional Economic Development

31.01.2023 14:00 CET Hybrid: IOS (Room 109) and online Seminar Series of the Economics Dept.

Talk by Boryana Madzharova (Erlangen–Nürnberg) as part of the Research Seminar Series of the IOS Economics Department.

This paper studies Poland’s special economic zones (SEZs) – a place-based policy attracting investors through corporate income tax exemptions amounting to up to 70% of investment costs. Using a unique combination of firm and municipality-level data, we evaluate employment outcomes in an event-study specification with staggered adoption spanning 1995-2016. We estimate a long-run increase in employment in targeted municipalities of 26%, predominantly reflecting gains in manufacturing jobs. The mean effect of one more permit issued to an investor operating in an SEZ is 1.5%. Indirect effects on contiguous non-treated communes are positive but modest and appear only a decade post-zone establishment. We find no impact of the policy on migration flows, wages or property prices. Due to an investor-driven zone expansion over time facilitated by a lack of territorial eligibility restrictions under EU state-aid rules – contrary to its stated objective of mitigating internal regional disparities – Poland’s SEZs are located in areas that were outperforming the rest of the country as early as 1995.

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