The special economic zone in the Kaliningrad region: development tool or institutional trap?

Abstract

In this paper we examine the special case of the "degenerated" Special Economic Zone (SEZ) in the Russian exclave on the Baltic Sea -the Kaliningrad region. The 'compensation Vs. development' policy dilemma associated with the SEZ in the exclave is elaborated using modified ERP and ETR techniques. Factual results and consequences of more than 20 years of ongoing SEZ institutional instability (a transitional shift from customs tariff to profit taxation preferences) are examined. We show how transfer pricing and formation of hybrid structures reinforce the import-substitution bias of exclave economics. Some concerns about the trade-off between stimulation policies and economic efficiency in the context of the SEZ are discussed. JEL: R58, P33, P48

Commodity flow model for an exclave region: Rent-seeking in the ‘transitional period’ of the special economic zone

“…When considering data on the GRP structure in terms of revenue and output (turnover data are given for reference) 3 , one can make several observations (table 1). In the structure of net axes, mineral extraction accounts for 57 %.…”

“…As the microlevel analysis forecast, the import substitution specialisation of the region expanded [3], though, technically, the percentage of value added slightly increased (it was a result of stricter requirements to processing contribution of regional companies as well as due to a convenient mechanism of creating value added through a company's gross profit margin, which is especially true for the SEZ-06 residents).…”

“…An interesting aspect is the monitoring of deformations caused by the mechanisms of extracting the transitional period rent (forecast at the microlevel) at the level of regional economy [3].…”

Special Economic Zones as Growth and Anti-growth Poles as Exemplified by Polish Regions

“…They argue that it would be more beneficial to support export in the entire national economy because that generates network effects and adds higher value, which in turn contributes to an increased local employment rate, income and transfer of technology (Willmore, 1995). A study on another kind of economic enclave, Special Economic Zone of the Kaliningrad Oblast in Russia (Russian region surrounded by UE states, Lithuania and Poland), was presented in a paper by Gareev (2013).…”

Commodity flow model for an exclave region: Rent-seeking in the ‘transitional period’ of the special economic zone

“…Наиболее интересным для нас аспектом яв-ляется отслеживание деформаций на уровне всей экономики региона, которые возникают в результате механизмов изъятия ренты переходно-го периода, предсказанных на микроуровне [3].…”