The new government is considering to re-introduce Free Economic Zones in Ukraine (http://www.kyivpost.com/news/business/bus_general/detail/62644/), zones that get special privileges (for example in terms of taxes or labor laws) to attract (foreign) investors (http://www.kyivpost.com/news/business/bus_general/detail/62644/). This idea is not new – even back in 2000, one commentator on the discussion on FEZ’s in Ukraine wrote ‘The debate has been on in Ukraine for about eight years.’ (http://pdc.ceu.hu/archive/00001290/01/26.pdf). Also in the academic literature there is a vast number of studies on the issue, which, taken together, seem to suggest that sometimes Free Economic Zones work. For example, a recent paper on China, (http://personal.lse.ac.uk/wangj2/Jin%20Wang%20JMP.pdf), by Jin Wang of the London School of Economics finds that ‘that the policy package, including private property rights protection, tax breaks and land use policy, increases per capita municipal foreign direct investment by 58% in the form of foreign-invested and export-oriented industrial enterprises’, and finds that this effect is not off-set by a reduction in non- FEZ municipalities. At the other side, a study on ‘state economic zones’ in California, which also offer tax advantages, by David Neumark of the University of California at Irvine (http://www.economics.uci.edu/docs/micro/w09/neumark.pdf) finds no effect on employment.
Whatever the case, even if FEZs turn out to be effective, this would be not so much an argument for establishing FEZs in specific government-chosen locations as well an argument for making the whole country an FEZ.
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