Essays on the Economic and Health Outcomes of Special Economic Zones (SEZ's) in Africa

Special Economic Zones (SEZs)- designated areas where governments offer incentives such as tax breaks, infrastructure development, and regulatory easing to attract foreign and domestic investment have risen significantly in Africa in the last two decades. Despite their increasing prevalence, the impact of SEZs in Africa has yet to be comprehensively studied due to data unavailability. Existing research primarily consists of descriptive studies of a single SEZs focusing on traditional outcomes such as the number of firms, FDI attraction, and employment generation. These studies, while informative, lack the empirical rigour to fully understand the effects of SEZs. This thesis addressed this literature gap by examining SEZs' localised economic, welfare and health impacts. The study uses nighttime light as a proxy for sub-national economic activity and links the Demographic and Health Survey (DHS) data with SEZ data in ten African countries. The Difference-in Difference estimates suggest that, on average, districts with SEZs in Ethiopia saw an increase of 0.06 standard deviation of the average nighttime light relative to the country's average after the establishment of the SEZs. The impact varies with the SEZ type. SEZs with larger land areas and those operating in sectors other than textiles, garments, and the leather industry tend to generate more economic activities in the SEZ districts. The estimated effect is also positive and significant for publicly managed SEZs, while positive but insignificant for privately managed SEZs. Drawing on the DHS data, the second part of the thesis suggests that households residing within 10 km of an SEZ experienced an increase of 0.25 standard deviation of the wealth index relative to the country average after the establishment of the SEZ in ten African countries. The magnitude of the effect is equivalent to owning a computer in Nigeria in 2008. The effect is not driven by residential sorting and is accompanied by increased access to household utilities, higher consumption of durable goods and a shift away from agricultural activities, suggesting that SEZs drive urbanisation in their neighbourhood. The final part evaluates the link between SEZ establishment and the incidence of anemia—a health condition associated with exposure to toxic materials in the air among women living near SEZs in three African countries. The results indicate that the establishment of SEZs does not have a statistically significant impact on anemia among women aged 15-45 living within 30 km of an SEZ. These results persist even when employing alternative estimation strategies, suggesting that SEZs do not potentially cause anemia in their neighbourhood.