The Impact of Special Economic Zones on Intra-Regional Income Inequality in the Philippines

In the Philippines, alleviating income inequality has remained a persistent development challenge for the government. In this context, Special Economic Zones (SEZs) have emerged as potent policy tools to make economic growth more geographically equal and to raise incomes of workers in the regions. The Philippines currently has around 400 SEZs in various iterations (e.g., Tourism Enterprise Zones, privately operated SEZs, freeport areas, etc.), which create jobs and attract investments across regions. While existing literature extensively covers the link between SEZs and job creation, foreign direct investment, and other economic growth metrics, there is a notable research gap regarding the relationship between SEZs and intra-regional income inequality. This study investigated the correlation between the steadily increasing number of SEZs and the regional Gini coefficient in the Philippines. Using a panel data regression analysis on Philippine regions from 2003 to 2021, the study tested SEZ count alongside other independent variables. The study found that among chosen independent variables, only the Gross Regional Domestic Product (GRDP) and the proportion of college-educated workers were statistically significant. The correlation between income inequality and SEZs was therefore inconclusive based on this study. However, exploring the impact of SEZs on income inequality is a valuable endeavor for policymakers as this may prove useful in more deeply evaluating the impact and benefits of SEZs.