Export Processing Zones, Backward Linkages and Unemployment

Yabuuchi, Shigemi

doi:2003.18.2.360

Journal of Economic Integration 2003 June;18(2) :360-371.
DOI: https://doi.org/10.11130/jei.2003.18.2.360

Export Processing Zones, Backward Linkages and Unemployment

Shigemi Yabuuchi

Nagoya City University and University of New South Wales

ABSTRACT

This paper investigates the effects of export processing zones (EPZs) on factor rewards, national income and the output of the domestic intermediate good producing sector (backward linkage effect) in surplus-labor developing countries. It is shown that if the intermediate good is internationally traded, an increase in foreign capital investment in the EPZs will not change factor rewards and then national income irrespective of the existence of unemployment. It is also shown that, contrary to the conventional wisdom, an increase in foreign capital investment decreases production of the intermediate good and increases unemployment. The effects of factor accumulation on outputs and unemployment are also examined. JEL Classifications: F22, O12

Keywords: K