Special Economic Zones and Local Economic Activities: Evidence from Nightlight Analysis in Thailand

Abstract Over the past few decades, special economic zones (SEZs) have become a widely used industrial policy tool to promote local economic development and drive structural transformation. However, evidence on the effects of SEZs in developing countries remains limited. This study examines the causal effect of SEZs established in Thailand in 2015, using nightlight satellite data as a proxy for annual economic activity from 2012 to 2020. Using the difference-in-differences estimation, the results suggest that the establishment of SEZs led to a statistically significant decline in the economic activity in the provinces where SEZs were established. Additionally, the results from the event study approach indicate a sustained negative impact of SEZ establishment, with the effect remaining statistically significant for several years. These findings suggest that policymakers should consider revamping SEZ policies to achieve more effective developmental outcomes.