Who really benefits from export processing zones? Evidence from Nicaraguan municipalities

Export processing zones are popular trade policies in developing countries, but there is limited empirical evidence on their local effects. This paper examines the impact of their establishment on the levels of per capita expenditure across Nicaraguan municipalities for the period 1993 to 2009. Using the time and cross-section variation of park openings in a difference-in-differences framework, I find that on average consumption levels increased by 10 to 12 percent in treated municipalities. Yet, average effects mask significant disparities across the expenditure distribution. The results suggest that the policy benefited the upper-tail the most: expenditure levels increased by up to 25 percent at the 90th percentile. At the opposite of the distribution, only the bottom decile registered a small positive effect of close to 10 percent across the period.