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

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.