NOTES
      1. Bank of Israel, Annual Report 1989 (Jerusalem: Bank of Israel,1990), p. 2 [Hebrew].
      2. Ibid., p. 36.
      3. Ibid., p. 50.
      4. Ibid., p. 4.
      5. The 3.6 percent decline of the total factor productivity is explained by a 2.8 point decline in intraindustry productivity of which 68 percent is explained by the contribution of manufacturing to this decline. Jacob Metzer, "The Slowdown of Economic Growth: a Passing Phase or the End of the Big Spurt?" in The Israeli Economy, Maturing Through Crises, ed. Yoram Ben-Porath (Cambridge: Harvard University Press, 1986), pp. 95, 96.
      6. See Tables 4, 5, 6, and 7, pp. 7, 8, 10, and 11.
      7. Paul W. Kuznets, "An East Asian Model of Economic Development: Japan, Taiwan and South Korea," Economic Development and Cultural Change 36, Supplement (April 1988), pp. 36-37.
      8. Meir Eldar, Hong Kong: A Concentration of Urbanization, Industrialization and International Trade, The David Horowitz Institute for Research of Developing Countries (Tel Aviv: Tel Aviv University, 1974), p. 9 [Hebrew].
      9. United Nations Industrial Development Organization (U.N.I.D.O.), Industry in a Changing World, special issue of the Industrial Development Survey for the Fourth General Conference of U.N.I.D.O. (New York: United Nations, 1983), p. 128. See also Tables 3, 4, and 5, pp. 6, 7, and 8.
      10. See Tables 1, 3, 4 and 5, pp. 4, 6, 7, and 8.
      11. See Tables 5, 6, and 7, pp. 8, 10, and 11.
      12. See Table 6, row (f), p. 10.
      13. See Tables 5 and 6, pp. 8 and 10.
      14. See Table 6, rows (d) and (e), p. 10.
      15. See Table 7, p. 11.
      16. The Manufacturers' Association of Israel, The Bureaucracy (Tel Aviv: The Manufacturers' Association of Israel, 1987), pp. 10-13 [Hebrew]; The Manufacturers' Association of Israel, Investments and Industrial Production: A How-To Manual (Tel Aviv: The Manufacturers' Association of Israel, 1990), pp. 22-26 [Hebrew].
      17. Folker Frobel, Jurgen Heinrichs and Otto Kreye, "Export Processing Zones in Developing Countries: Results of a New Survey," Working Paper no. 43 (Geneva: International Labor Office, 1987), p. 11.
      18. United Nations Centre on Transnational Corporations, "The Role of Free Economic Zones in the USSR and Eastern Europe," Current Studies Series A, no. 14 (New York: United Nations, 1990), p. 44.
      19. Koichi Hamada, "An Economic Analysis of the Duty-Free Zone," Journal of International Economics 4, no. 3 (August 1974), pp. 225-226. Hamada's definition of an FEPZ seems to hit the mark more than others, but this is not meant to imply that the above paper's conclusions are acceptable. The author failed to consider the effect of direct foreign investment in increasing marginal productivity, external effects and enhancement of human capital through learning. Nor did he take into consideration the economies-of-scale of industrial inputs and services generated by the FEPZ itself.
      20. See Appendix, p. 33.
      21. Ibid.
      22. See section on "The Intangible Price," p. 9.
      23. Herbert G. Grubel, "Towards a Theory of Free Economic Zones," Weltwirtschaftliches Archiv 118 (1982), p. 52.
      24. K.Y. Yu, "Comments on Dr. Keesing's Paper," in Richard L. Bolin, Linking the Export Processing Zone to Local Industry (Flagstaff, Arizona: The Flagstaff Institute, 1990), p. 153.
      25. David K. Eiteman, Cheol I. Eun, and Arthur Stonehill, Multinational Business Finance, 5th ed. (Reading, Massachusetts: Addison-Wesley Publishing Co., 1989), p. 467.
      26. Ibid., p. 471.
      27. Michael Michaeli, "Exports and Growth: An Empirical Investigation," Journal of Development Economics 4 (March 1977), pp. 49-53; Rati Ram, "Exports and Economic Growth in Developing Countries: Evidence from Time-Series and Cross-Section Data," Economic Development and Cultural Change 36 (October 1987), pp. 51-72.
      28. Ram, "Exports and Economic Growth in Developing Countries: Evidence from Time-series and Cross-section Data," p. 71, n. 27.
      29. Thus, Taim-Jy Chen and De-pino Tang, "Export Performance and Productivity Growth: The Case of Taiwan," Economic Development and Cultural Change 38 (April 1990), p. 583, argue:
          ...exporting...is conducive to productivity growth....However, exporting to foreign markets [places an]...extra burden on production costs....Therefore, it is unclear a priori that export expansion always enhances productivity.
        The authors believe that the productivity created by the export sector may be offset by additional costs, which could be saved when producing for the local market. But this is the classical justification for introducing import-substitution industrializa- tion.
      30. Tuvia Blumental, "Exports and Economic Growth: The Case of Post-War Japan," Quarterly Journal of Economics 86 (November 1972), p. 618.
      31. Gershon Feder, "On Exports and Economic Growth," Journal of Development Economics 12 (February/April 1983), p. 65; Blumental, "Exports and Economic Growth: The Case of Post-War Japan," p. 622, quotes Mitsuo Yaito to the effect that "the rate of technological change was higher in the export than in the domestic sector."
      32. Blumental, "Exports and Economic Growth: The Case of Post-War Japan," p. 621.
      33. Derek T. Healey, "The Underlying Conditions for the Successful Generation of EPZ - Local Linkages: The Experience of the Republic of Korea," in Bolin, Linking the Export Processing Zone to Local Industry, p. 59.
      34. Feder, "On Exports and Economic Growth," p. 71.
      35. Tzong-Shian Yu, "Strategies and Policies for Economic Development in Taiwan," Discussion Paper no. 7901 presented at a workshop of the Department of Economics, University of Chicago, Oct. 24, 1978 (Taipei, Taiwan: The Institute of Economics, Academia Sinica), p. 5.
      36. Ibid.
      37. Ibid., p. 3.
      38. Tibor Scitovsky, "Economic Development in Taiwan and South Korea, 1965-1981," in Models of Development: A Comparative Study of Economic Growth in South Korea and Taiwan,ed. Lawrence J. Lau (San Francisco: Institute of Contemporary Studies Press, 1986), p. 145.
      39. U.S. Agency for International Development (A.I.D.), Methods of Investment Promotion for Less Developed Countries (Washington, D.C.: U.S. Agency for International Development, 1967), p. 16.
      40. Tzong-Shian Yu, "Strategies and Policies for Economic Development in Taiwan," p. 17. A similar idea was proposed in response to the decline in refuel services to transatlantic flights at the Shannon International Airport. The authorities decided in 1959 to transform this part of the airport area into a Free Zone Industrial Park, namely a Free Trade Zone using the transportation infrastructure to manufacture high value-added products for export. Operation began in 1960 with 440 new jobs, which reached 4780 in 1970 and 3,800 in 1975. This innovation demonstrated that (1) a Free Zone can be an Industrial Park, and (2) such a zone can be established anywhere. This concept has been developed further by the United Nations Industrial Development Organization. See International Labor Organization and United Nations Center for Transnational Corporations, Economic and Social Effects of Multinational Enterprises in Export Processing Zones (Geneva: International Labor Organization, 1988), p. 1.
      41. K.T. Li, "The Export Processing Zone - A Tool for Promoting Exports," in Bolin, Linking the Export Processing Zone to Local Industry, pp. 13-21.
      42. Peter G. Warr, "Export Processing Zones, The Economics of Enclave Manufacturing," Research Observer 4 no. 1, The World Bank (January 1989), p. 85.
      43. See evidence in Table 8, p. 21.
      44. Mario Carrillo-Huerta and Victor L. Urquidi, "Trade Deriving from the International Division of Production: Maquila and Postmaquila in Mexico," Journal of the Flagstaff Institute 8 (April 1989), p. 17.
      45. Ibid., p. 40, nn. 1 and 2; Richard L. Bolin, ed., A Conference with Peter Drucker: Production Sharing (Flagstaff, Arizona: The Flagstaff Institute, 1988), inside back cover.
      46. [Editor], "A Survey of Mexico - The Shadow of the Past," The Economist, September 1987, p. 6. GNP per capita has been $470 in Mexico and $560 in Hong Kong.
      47. Carrillo-Huerta and Urquidi, "Trade Deriving from the International Division of Production: Maquila and Postmaquila in Mexico," pp. 18-20.
      48. Ibid., p. 37.
      49. [Editor], "A Survey of Mexico - the Shadow of the Past."
      50. See Table 9, p. 23.
      51. Carrillo-Huerta and Urquidi,"Trade Deriving from the International Division of Production: Maquila and Postmaquila in Mexico," p. 18, p. 42 n. 13.
      52. Sergio Bermudez, "Linking the Maquiladoras (EPZs) to Local Industry," in Bolin, Linking the Export Processing Zone to Local Industry, p. 122.
      53. [Editor], "Mexico: A New Economic Era," International Business Week, 12 November 1990, p. 50.
      54. Carrillo-Huerta and Urquidi, "Trade Deriving from the International Division of Production: Maquila and Postmaquila in Mexico," p. 35.
      55. See Table 9, p. 23; Carrillo-Huerta and Urquidi, "Trade Deriving from the International Division of Production: Maquila and Postmaquila in Mexico," p. 30.
      56. [Editor], "Mexico: A New Economic Era."
      57. See Appendix.

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      APPENDIX