Impact of special economic zones on export diversification in sub-saharan Africa

Abstract

This paper presents a comprehensive analysis of the impact of special economic zones (SEZs) on export diversification in Sub-Saharan Africa (SSA). With export diversification being a key concern for SSA policymakers, many countries in the region have implemented SEZ programs over the last three decades to stimulate industrial development and export-led growth. By providing incentives to attract investment, SEZs aim to enhance the business environment and draw firms from both traditional and emerging sectors. Using a difference-in-differences approach on a panel dataset covering 32 SSA countries from 1970 to 2014, this study investigates the effects of SEZ adoption on overall export diversification, as well as on the extensive and intensive margins of exports. The findings suggest that SEZ adoption has led to a more balanced distribution of export shares among traditional sectors, thereby promoting greater export diversification in SSA countries. However, the effectiveness of SEZs in fostering the creation of entirely new sectors appears to be limited.