Essays on Development and International Economics
This doctoral thesis investigates the determinants of growth of firms and regions in developing countries. While there is a plethora of economic tools that can be used to stimulate economic development, this thesis focuses on the role of place-based policies and service inputs as drivers of innovation activities of firms. The first two chapters examine the effects of Special Economic Zones (SEZs), a prevalent industrial policy aimed at fostering local development, on the performance of firms and household well-being in developing countries. Chapter 1 evaluates the effects of SEZ establishment on firm productivity growth in India using a novel geo-referenced dataset and a difference-in-differences design with inverse probability weighting. Findings show no overall productivity gains from SEZs, but heterogeneous effects emerge: firms in privately-owned SEZs benefit, while those in publicly-owned ones show losses, potentially due to rent-seeking behavior among managers. Chapter 2 shifts focus to household welfare in Africa, analyzing SEZs' effects on wealth using geocoded Demographic and Health Survey data from ten countries (1990–2020). Results indicate that households living within 10 km of SEZs experience significant increases in wealth. Positive effects include improved access to utilities, better housing quality, and higher consumption of durable goods, alongside a shift away from agricultural employment. This suggests that SEZs bring with them urbanisation trends. Chapter 3 explores how the liberalization of upstream services sector affects innovation in downstream Indian manufacturing firms. Using a shift-share research design, I show that service liberalization increases the product scope of manufacturing firms. The mechanism analysis reveals that allowing Foreign Direct Investments into the banking sector relaxes firm’s financial constraints and facilitates product innovation.
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