The Uneven Impact of Industrial Zones on Formal Job Creation in Vietnam

Industrial zones are a widely used industrial policy tool, yet their effects vary enormously. Matching the timing and location of zone establishment to firm-level data in Vietnam, we estimate that a new zone raises formal employment by 2,000 workers within seven years. This average masks extreme skewness: a handful of zones generate the gains while the rest produce almost none. Zones near major trade hubs account for most of the effect, driven by export-oriented foreign manufacturers. Accounting for spillovers, domestic firms face agglomeration shadows nearby but gain farther out, while foreign manufacturers operate as enclaves, generating few local linkages.