Abstract
This paper investigates the effects of foreign direct investment (FDI) into the export processing zones (EPZs) on factor rewards, national income, and the price and output of a domestic intermediate good producing sector (backward linkage effect) under a local content requirement (LCR) by the host government. FDI has important regional resource allocation effects between the domestic region and EPZ through the backward linkage effect. It also examines the effects of a change in the LCR itself on these variables.
