Place-Based Preferential Policies and Firm Performance

This policy research working paper examines the effects of economic zone programs on firm performance in South Asia. The study utilizes a unique survey of firms located both within and outside these zones to assess the impact of zone programs on various aspects of firm performance, including exports, investment, employment, and productivity. The research employs a propensity score matching approach and district-level fixed effects to investigate four key questions: whether zones support firm performance, if the type of zone makes a difference, which public support services are most effective, and whether firms inside zones grow faster. The findings reveal that being inside a zone positively affects foreign direct investment and employment, the effects across zone types are mixed, infrastructure and trade facilitation play a more significant role in firm performance than fiscal incentives and governance facilities, and firms inside zones experience faster growth.