Capturing Value at Home? Special Economic Zones and Domestic Value Added

ABSTRACT We examine how China's Special Economic Zones (SEZs) shape the domestic value‐added ratio (DVAR) in firm‐level exports, highlighting a critical yet underexplored dimension of export‐led growth. Leveraging rich microdata from the Annual Survey of Industrial Firms and Chinese Customs Trade Statistics (2000–2013), we investigate whether SEZ policies effectively promote domestic value creation. Our empirical strategy identifies a significant positive impact of national‐level SEZs on firms' DVAR in exports, especially in High‐tech Industrial Development Zones. This effect is driven primarily by firms substituting imported inputs with domestically sourced inputs, indicating stronger local supply chain integration. The findings are robust and more pronounced for larger and foreign‐invested firms, underscoring the role of firm heterogeneity in leveraging SEZ benefits. By quantifying how SEZ policies enable firms to retain more value at home, this study contributes to the literature on place‐based industrial policy and global value chain upgrading. It also offers timely evidence that SEZ‐led industrial clustering can enhance domestic value capture and strengthen supply chain resilience, aligning with broader efforts to cultivate and boost national supply bases in an open‐economy context.