FDI, SEZ and Agriculture

  • Sarbajit Chaudhuri
  • Ujjaini Mukhopadhyay


A pertinent policy debate among economists and policymakers in the developing economies has emerged whether the SEZ policy is at all beneficial for a predominantly agricultural economy. The major concerns are as follows: (1) Can industry (SEZs) and agriculture grow simultaneously without hurting one another? (2) Would this policy affect the unemployment situation adversely? (3) How would the economic condition of the workers in the rural sector be affected due to this policy? Since agriculture and industry are the main wheels of such an economy, these concerns need to be addressed first before proceeding further with the SEZ policy. This chapter attempts to provide answers to the above questions in terms of a three-sector Harris–Todaro-type general equilibrium model with an SEZ located in the rural sector. The analysis reveals that agriculture and SEZ can indeed grow simultaneously, and the unemployment problem and the economic condition of the common people may also improve in the process under certain conditions.


Wage Rate Foreign Capital Special Economic Zone Urban Sector Efficiency Unit 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


  1. Aggarwal A (2004) Export processing zones in India: analysis of the export performance, Working paper no. 148. Indian Council for Research on International Economic Relations, New DelhiGoogle Scholar
  2. Aggarwal A (2005) Performance of export processing zones: a comparative analysis of India, Sri Lanka, and Bangladesh, Working paper no. 155. Indian Council for Research on International Economic Relations, New DelhiGoogle Scholar
  3. Aggarwal A (2010) Economic impacts of SEZs: theoretical approaches and analysis of newly notified SEZs in India. MPRA paper 20902, University Library of Munich, GermanyGoogle Scholar
  4. Aggarwal A, Hoppe M, Walkenhorst P (2008) Special economic zones and economic diversification: some evidence from South Asia. In: Newfarmer R, Shaw W, Walkenhorst P (eds) Breaking into new markets: emerging lessons for export diversification. World Bank, Washington, DCGoogle Scholar
  5. Beladi H, Marjit S (1992a) Foreign capital and protectionism. Can J Econ 25:233–238CrossRefGoogle Scholar
  6. Beladi H, Marjit S (1992b) Foreign capital, unemployment and national welfare. Japan World Econ 4:311–317CrossRefGoogle Scholar
  7. Beladi H, Naqvi N (1988) Urban unemployment and non-immiserizing growth. J Dev Econ 28:365–376CrossRefGoogle Scholar
  8. Bhaduri A (2007) Development or developmental terrorism. Econ Polit Wkly 42(7)Google Scholar
  9. Bontempi ME, Prodi G (2009) Entry strategies into China: the choice between joint ventures and wholly foreign-owned enterprises: an application to the Italian manufacturing sector. Int Rev Econ Financ 18:11–19CrossRefGoogle Scholar
  10. Chaudhuri S (2007) Foreign capital, welfare and unemployment in the presence of agricultural dualism. Jpn World Econ 19(2):149–165CrossRefGoogle Scholar
  11. Chaudhuri S, Yabuuchi S (2010) Formation of special economic zone, liberalized FDI policy and agricultural productivity. Int Rev Econ Finance 19(4):779–788CrossRefGoogle Scholar
  12. Corden WM, Findlay R (1975) Urban unemployment, intersectoral capital mobility and development policy in a dual economy. Economica 42:59–78CrossRefGoogle Scholar
  13. Devereux J, Chen LL (1995) Export zones and welfare: another look. Oxf Econ Pap 47:704–713Google Scholar
  14. Feenstra RC, Wei SJ (2010) Introduction to China’s growing role in world trade. Published as NBER chapters. In: China’s growing role in world trade. University of Chicago Press, Chicago, pp 1–31Google Scholar
  15. Fernandes W (2007) Singur and the displacement scenario. Econ Polit Wkly 42(3):203–206Google Scholar
  16. Ge W (1999) Special economic zones and the opening of the Chinese economy: some lessons for economic liberalization. World Dev 27(7):1267–1285CrossRefGoogle Scholar
  17. Graham EM (2004) Do export processing zones attract FDI and its benefits: the experience from China. IEEP 1:87–103CrossRefGoogle Scholar
  18. Hamada K (1974) An economic analysis of the duty free zone. J Int Econ 4:225–241CrossRefGoogle Scholar
  19. Hamilton C, Svennson L (1982) On the welfare effects of a free trade zone. J Int Econ 13:45–64CrossRefGoogle Scholar
  20. Hamilton C, Svennson L (1983) On the choice between capital import and labour export. Eur J Econ 20:167–192Google Scholar
  21. Harris JR, Todaro MP (1970) Migration, unemployment and development: a two-sector analysis. Am Econ Rev 60:126–142Google Scholar
  22. Huang LS (2008) The paradigm of tracing socialism with Chinese characteristics. Guangdong Dangshi Hist CCP Guangdong) 3:22–28Google Scholar
  23. Lemoine F (2000) FDI and opening up the Chinese economy, Working paper no.11. Centre d’Etudes Prospectives et d’Information Internationale, ParisGoogle Scholar
  24. Li K, Whitewell J, Yao S (2005) A growth model for China’s special economic zone. Pac Econ Rev 10:439–449CrossRefGoogle Scholar
  25. Miyagiwa K (1986) A reconsideration of the welfare economics of the free trade zone. J Int Econ 21:337–350CrossRefGoogle Scholar
  26. Miyagiwa K (1993) The locational choice for free trade zones: rural versus urban options. J Dev Econ 40:187–203CrossRefGoogle Scholar
  27. Prasad E, Wei SJ (2007) The Chinese approach to capital inflows: patterns and possible explanations. In: Prasad E, Wei SJ (eds) Capital controls and capital flows in emerging economies: policies, practices and consequences. University of Chicago Press, Chicago, pp 421–480CrossRefGoogle Scholar
  28. Ranjan P (2006) Preferential trade areas, multinational enterprises, and welfare. Can J Econ 39(2):493–515CrossRefGoogle Scholar
  29. Reddy VR, Reddy BS (2007) Land alienation and local communities. Econ Polit Wkly 42(31):3233–3240Google Scholar
  30. Rolfe RJ, Woodward DP, Kagira B (2004) Footloose and tax free: incentive preferences in Kenyan export processing zones. S Afr J Econ 72(4):784–807CrossRefGoogle Scholar
  31. Rosen DH (1999) Behind the open door: foreign enterprises in the Chinese marketplace. Institute for International Economics, Washington, DCGoogle Scholar
  32. Sarma EAS (2007) Help the rich, hurt the poor. Econ Polit Wkly 42(21):1900–1902Google Scholar
  33. Schweinberger AG (2003) Special economic zones in developing/or transition economies: a policy proposal. Rev Int Econ 11:619–629CrossRefGoogle Scholar
  34. Shah S (2008) Special economic zones in South Asia: comparative analysis of Bangladesh, Sri Lanka, and India. Harvard University/Mimeo, Cambridge, MA, pp 1–27Google Scholar
  35. Tang W (2001) Urban development and planning in Shenzhen special economic zone: elements for an informed understanding, Occasional paper no. 2. Centre for China Urban and Regional Studies, Hong Kong Baptist University, Hong KongGoogle Scholar
  36. Wang J (2010) The economic impact of special economic zones: evidence from Chinese municipalities. J Dev Econ 101(1):133–147Google Scholar
  37. Wei X (2000) Acquisition of technological capability through Special Economic Zones (SEZs): the case of Shenzhen SEZ. Ind Innov 7(2):199–221CrossRefGoogle Scholar
  38. Willmore L (1996) Export processing in the Caribbean: lessons from four case studies, Working paper no. 42. United Nations Economic Commission for Latin America and the Caribbean, SantiagoGoogle Scholar
  39. Wong K (1987) China’s special economic zone experiment: an appraisal. Geografiska Annaler Ser B Hum Geogr 69(1):27–40CrossRefGoogle Scholar
  40. World Bank (2001) Export processing zones in Sub-Saharan Africa, Economic and social policy findings 193. World Bank, Washington, DCGoogle Scholar
  41. World Bank (2008) Special economic zones: performance, lessons learned, and implications for zone development. World Bank, Washington, DCGoogle Scholar
  42. Yabuuchi S (2000) Export processing zones, backward linkages, and variable returns to scale. Rev Dev Econ 4:268–278CrossRefGoogle Scholar
  43. Yeung Y (2000) Globalization and networked societies: urban-regional change in Pacific Asia. University of Hawaii Press, HonoluluGoogle Scholar
  44. Yeung Y, Lee J, Kee G (2009) China’s special economic zones at 30. Eurasian Geogr Econ 50(2):222–240CrossRefGoogle Scholar
  45. Young L, Miyagiwa K (1987) Unemployment and the formulation of free-trade zones. J Dev Econ 26:397–405CrossRefGoogle Scholar
  46. Zheng Y (2006) Institutions matter: how do special economic zones attract foreign direct investment in China? Paper presented at the annual meeting of the International Studies Association, Town & Country Resort and Convention Center, San Diego, CA, 22 Mar. (

Copyright information

© Springer India 2014

Authors and Affiliations

  • Sarbajit Chaudhuri
    • 1
  • Ujjaini Mukhopadhyay
    • 2
  1. 1.Department of EconomicsUniversity of CalcuttaKolkataIndia
  2. 2.Department of EconomicsBehala CollegeKolkataIndia

Personalised recommendations