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Etemadmoghadam F, Sameti M, Ghobadi S, Mahinizadeh M. Customs Tariff Exemption and Performance of Free Zones A Dynamic Stochastic General Equilibrium Model. QJER 2024;
URL: http://ecor.modares.ac.ir/article-18-69564-en.html
URL: http://ecor.modares.ac.ir/article-18-69564-en.html
1- Ph. D. Student of Economics, Department of Economics, Islamic Azad University, Khorasgan Branch, Isfahan, Iran
2- Professor of Economics at University of Isfahan, Isfahan, Iran ,sameti.majid.ui@gmail.com
3- Assistant Professor of Economics, Department of Economics, Islamic Azad University, Khorasgan Branch, Isfahan, Iran
4- Assistant Professor of Economics, Yazd University, Yazd, Iran
2- Professor of Economics at University of Isfahan, Isfahan, Iran ,
3- Assistant Professor of Economics, Department of Economics, Islamic Azad University, Khorasgan Branch, Isfahan, Iran
4- Assistant Professor of Economics, Yazd University, Yazd, Iran
Abstract: (294 Views)
Aim and Introduction
There are many models and tools to communicate with the international economy and use its capacity to exploit for the benefit of the domestic economy. One of these famous models is the establishment of free zones and attracting international capital through these areas. According to the definition in the Kyoto Convention, a free economic zone is a part of the mainland where the exchange of goods is considered beyond the existing restrictions in the mainland and is not bound by the customs and tax laws of the mainland. Free zones have different economic regulations from other parts of the mainland. The differences can provide the basis for attracting capital, commercial prosperity, and economic growth. To grow and develop these areas, countries use various incentives such as legal, tax, customs, and financial incentives.
Methodology
The term general equilibrium in this method means that all the markets included in this structure must be in balance. In other words, the market settlement condition must be established. This means that in the general equilibrium model, all variables are assumed to be endogenous and non-constant, and this is contrary to the partial equilibrium structure, where the variables of other markets are assumed to be constant. This research analyzes the impact of customs exemption on imported goods in free zones in the form of the DSGE method with a neoclassical pproach. All the relationships necessary to explain the effectiveness of this incentive according to the theoretical foundations, the selected goals of the establishment of regions in Iran and their performance have been stated, and other relationships in other economic sectors have been considered to complete the model. The parameters of the model are also estimated according to the calibration method and using calculation software and econometric estimation. The performance of the model is evaluated by comparing the widths obtained from the simulation of the model and the torques of the real data. Finally, the simulation of the model can be seen by applying impulses.
Findings
In this study, the simulation of customs duty exemption impulses in free zones shows that applying impulses to increase import exemptions to free zones, leads to an increase in foreign direct investment, an increase in capital accumulation, an increase in exports of free zones, and finally, an increase in employment. As the export in free zones increases, the export of products from the mainland decreases.
Discussion and Conclusion
The results of applying the impulse effect of reducing import tariffs in free zones indicate that the intensity of the increase in the exemption of import tariffs for goods to free zones leads to an increase in foreign direct investment, an increase in the amount of investment, an increase in capital accumulation, an increase in the export of free zones and finally, the increased employment rate. In terms of export and domestic production, with the application of tariff reduction, imports in free zones will increase and exports from the mainland will decrease, and due to the weight of exports from the mainland compared to free zones, the total exports of the country will decrease
There are many models and tools to communicate with the international economy and use its capacity to exploit for the benefit of the domestic economy. One of these famous models is the establishment of free zones and attracting international capital through these areas. According to the definition in the Kyoto Convention, a free economic zone is a part of the mainland where the exchange of goods is considered beyond the existing restrictions in the mainland and is not bound by the customs and tax laws of the mainland. Free zones have different economic regulations from other parts of the mainland. The differences can provide the basis for attracting capital, commercial prosperity, and economic growth. To grow and develop these areas, countries use various incentives such as legal, tax, customs, and financial incentives.
Methodology
The term general equilibrium in this method means that all the markets included in this structure must be in balance. In other words, the market settlement condition must be established. This means that in the general equilibrium model, all variables are assumed to be endogenous and non-constant, and this is contrary to the partial equilibrium structure, where the variables of other markets are assumed to be constant. This research analyzes the impact of customs exemption on imported goods in free zones in the form of the DSGE method with a neoclassical pproach. All the relationships necessary to explain the effectiveness of this incentive according to the theoretical foundations, the selected goals of the establishment of regions in Iran and their performance have been stated, and other relationships in other economic sectors have been considered to complete the model. The parameters of the model are also estimated according to the calibration method and using calculation software and econometric estimation. The performance of the model is evaluated by comparing the widths obtained from the simulation of the model and the torques of the real data. Finally, the simulation of the model can be seen by applying impulses.
Findings
In this study, the simulation of customs duty exemption impulses in free zones shows that applying impulses to increase import exemptions to free zones, leads to an increase in foreign direct investment, an increase in capital accumulation, an increase in exports of free zones, and finally, an increase in employment. As the export in free zones increases, the export of products from the mainland decreases.
Discussion and Conclusion
The results of applying the impulse effect of reducing import tariffs in free zones indicate that the intensity of the increase in the exemption of import tariffs for goods to free zones leads to an increase in foreign direct investment, an increase in the amount of investment, an increase in capital accumulation, an increase in the export of free zones and finally, the increased employment rate. In terms of export and domestic production, with the application of tariff reduction, imports in free zones will increase and exports from the mainland will decrease, and due to the weight of exports from the mainland compared to free zones, the total exports of the country will decrease
Article number: 2
Keywords: Free Zones, Customs Tariff, Stochastic Dynamic General Equilibrium Model, Legal Exemption, Export
Article Type: Original Research |
Subject:
Public Economics
Received: 2023/06/1 | Revised: 2025/02/26 | Accepted: 2024/04/18 | Published: 2024/12/30
Received: 2023/06/1 | Revised: 2025/02/26 | Accepted: 2024/04/18 | Published: 2024/12/30
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