Special Economic Zones and Firm Performance: Evidence from Vietnamese Firms
How do Special Economic Zones (SEZs) shape firm performance in Vietnam? In his recent research, Professor Karsten Mau explored the impact of SEZs on firm performance and the underlying mechanisms contributing to better firm performance.
This paper examines the performance of Vietnamese firms located inside and nearby Special Economic Zones (SEZs) during the period 2007-2019. Applying a staggered Difference-in-Differences approach, we find that firms within SEZs experience significant increases in terms of their employment, sales, and labor productivity. The labor productivity and sales of firms located in the proximity of SEZs also increases. Foreign, large, science-based, and supplier-dominated firms appear to benefit the most. We also provide insights on the mechanisms behind these effects: firms within SEZs appear to benefit from enhanced credit access, while input-output linkages likely explain firm growth in the neighboring area. Nevertheless, technological distance seems to remain a challenge, as co-locating with foreign firms from developing countries appears to drive the gains in labor productivity.
