raja sannassee | University of Mauritius (original) (raw)

Papers by raja sannassee

Competence Centre on Money, Trade, Finance and Development, 2012

World Academy of Science, Engineering and Technology, International Journal of Economics and Management Engineering, 2015

This paper analyses the impact of the various enabling elements towards fostering entrepreneurial... more This paper analyses the impact of the various enabling elements towards fostering entrepreneurial behavior for two Sub Saharan African countries namely Mauritius and Botswana, with focus is on role of institutions (ministries, government support institutions, financing institutions and SME associations). Using a structural equation modeling framework, it is found that finance was some of the most determinant of respondents' evaluation of the business climate thus emphasizing on the crucial of such an ingredient. Interestingly government related factors such as government support and institutional support are also reported to have a significant influence on the SME business climate in both countries.

Journal of Travel Research, 2019

Numerous studies have focused on delineating the relationship between tourism and economic growth... more Numerous studies have focused on delineating the relationship between tourism and economic growth. In this article, we present the results of a rigorous meta-regression analysis based on 545 estimates drawn from 113 studies that empirically tested the tourism-led growth hypothesis (TLGH). The results suggest the presence of publication bias in the literature on this topic, where the majority of studies report positive and statistically significant estimates. Findings provide support for the TLGH, but they also suggest that the estimates are sensitive to a number of factors that are related to country data, specification, and estimation characteristics, and time span. Such sensitivities suggest that greater emphasis should be placed on reporting estimates of the relationship between tourism and economic growth across a variety of methodological characteristics and specification and estimation choices. The implications of the results for theory development are also discussed.

International Journal of Tourism Research, 2018

This paper in the first place attempts to assess the impact of air access liberalization on touri... more This paper in the first place attempts to assess the impact of air access liberalization on tourism development for Mauritius and secondly goes on to analyse the dual impact of the interplay between air access liberalization and marketing promotion efforts as well. Using dynamic time series analysis, namely an Autoregressive Distributed Lag (ARDL) framework over the period 1970 to 2015, the results reveal that air access liberalization is an important element for tourism development. The findings also interestingly point to the positive and significant impact of the interplay between air access liberalization and marketing promotion efforts in attracting tourist.

Review of Development Economics, 2017

This paper examines the impact of foreign real estate on land prices in Mauritius. Using a panel ... more This paper examines the impact of foreign real estate on land prices in Mauritius. Using a panel dataset comprising price, quantity and other information for a variety of luxury villas and apartments, we show that the price of land paid by locals has been pushed up by a modest 4-22% in total as a result of these developments. We also examine the determinants of the prices of the dwellings in these schemes, finding that they are strongly related to the sizes of the plots, whether they have ocean views and the desirability of the region in which they are sited, although there remains considerable unexplained heterogeneity.

Tourism Economics, 2016

The present study attempts to address the important question of whether foreign direct investment... more The present study attempts to address the important question of whether foreign direct investment (FDI) flowing into the tourism sector has served to enhance economic growth in Mauritius for the period 1984–2014. Using a dynamic vector error correction model, and catering for dynamism, the results show that tourism FDI has indeed contributed to fostering economic growth; albeit the magnitude of the coefficient being relatively smaller than FDI in the non-tourism sector. A plausible explanation for such a finding may reside in the fact that the bulk of FDI flows in the non-tourism sectors while domestic investment predominates in the tourism sector in Mauritius. The findings also demonstrate a positive relationship between tourism development and economic growth, thus supporting the tourism-led growth hypothesis.

International Business & Economics Research Journal (IBER), 2011

This paper focuses on ascertaining the strategic orientations and determinants of wholly-owned su... more This paper focuses on ascertaining the strategic orientations and determinants of wholly-owned subsidiaries in the Mauritian export-processing zone, with special emphasis on the textile and wearing apparel industry. The results show that costs minimisation, the ability to export to protected markets and the distinct possibility to evade barriers to entry imposed on their home nations were clear motivations underlying the establishment of operations by wholly-owned subsidiaries in the MEPZ. Furthermore, using regression analysis, the analysis shows that quality of infrastructure and cultural proximity were significant location determinants for MEPZ wholly-owned subsidiaries. Finally, using independent t-test, the results also highlight the greater prevalence attached by Asian firms to infrastructural provisions, cultural proximity and preferential access to developed markets in relation to their European counterparts.

This paper analyzes the performance of Mauritian mutual funds by initially investigating the perf... more This paper analyzes the performance of Mauritian mutual funds by initially investigating the performance of the mutual funds on a risk-adjusted basis and then on an individual basis with respect to their respective benchmark performances. The results show that the rankings obtained by applying both the Sharpe and Treynor rules are almost the same, implying that the funds appear to be well-diversified. Moreover, the majority of funds selected are reported to have a relatively high Sharpe ratio, thus indicating a pretty good performance. However, the positive Jensen’s alpha indicates that fund managers through their stock picking skills, privileged information or intuition have ‘beaten the market’. Individual analysis revealed that funds are heavily dependent on the performance of the local stock market, that is, they move in line with the market index. Interestingly, those mutual funds investing heavily in the local stock market are reported to ‘beat the market’.

This paper provides an analysis of return distribution properties in the presence of non-normalit... more This paper provides an analysis of return distribution properties in the presence of non-normality of returns. Using secondary data, the study examines the behavior of returns in the emerging African Stock Exchanges, such as Botswana, Ghana, Mauritius, Nigeria and South Africa for the period 1998 to 2003. The statistical results show non-normality in the return series for African markets. Also, the findings show that mean returns from all the five emerging African markets are higher than the returns for the developed markets. Nearly all markets have positive excess kurtosis, which is consistent with the stylized fact of ‘fat tails’ in equity returns. Furthermore, while the return series of African markets follow a non-normal distribution, developed markets closely approximate the normal distribution.

One of the main objectives of accounting systems is to provide investors with relevant informatio... more One of the main objectives of accounting systems is to provide investors with relevant information that may be useful in decision making for efficient resource allocation. This paper investigates the value relevance of accounting number in Mauritius through the implementation of six models. Hence, using a sample of all Mauritian firms listed on the SEM-7 for the period 1998-2005, the value relevance of book value, earnings and dividends are analyzed. Through various comparisons, the overall results of the study suggest that the Ohlson model is a better model in explaining share prices. Based on the above findings, the current issues that are hinging the stock market development along with their plausible solutions are subsequently discussed.

The Journal of Developing Areas, 2015

Governments of developing countries have been targeting poverty alleviation and deprivation as th... more Governments of developing countries have been targeting poverty alleviation and deprivation as their main goal and thus have been working for pro poor growth. It is observed that African countries need considerable amount of investment in order to help their economies to prosper. African countries can benefit from growth through foreign investment which is seen as an important source of capital flows. However, even if growth is important for an economy, it is not a good indicator of social development. Welfare can be worsen if growth attained by a country is not pro poor and can also result in an increase in inequality gap. In this regards, this study is based on the investigation on FDI and poverty alleviation or welfare maximization in selected Sub Saharan African countries. The present paper takes a different approach in analyzing the impact of FDI on poverty reduction. In the context of selected Sub Saharan African countries and over the period 1990-2010, a dynamic Panel vector error correction model is adopted. In effect the Vector autoregressive model or the vector error correction model is of great importance in showing the dynamic behavior of economic time series and for forecasting. Also, it often provides better forecasts and describes theory-based simultaneous equations models. Thus, given the endogeneity and causality issues, using such a model can prove to be highly beneficial. The main variables used are FDI net inflows and poverty headcount index. Other variables used in this study include the unemployment rate, inflation, openness, government debt and government expenditure, education level and GDP per capita. The results suggest that indeed FDI is an efficient tool in fighting poverty both in the short run and long run with the sample of countries considered. Moreover, the results favor a uni directional relationship between FDI and social welfare (poverty reduction) and a bi directional causality between FDI and economic welfare (Economic growth). According to this study, foreign investment is an important ingredient for both economic and social development for Sub Saharan African countries. Hence, the government should devise appropriate policies to attract such capital flows. These can be in terms of an improvement in institutional capacity and easier administrative procedures which would surely favor the entrance of foreign firms in the host countries.

Development Southern Africa, 2015

The present study assesses the impact of relative prices on tourism flows in Mauritius. To accoun... more The present study assesses the impact of relative prices on tourism flows in Mauritius. To account for dynamism in tourism flows modelling, a dynamic time series analysis-namely the vector autoregressive model-is employed. The results show that relative price measures have a longrun impact on international tourism flows, indicating that tourists are sensitive to price levels. The relative average cost in the different competing destinations is also reported to be positive and significant, indicating that the impact of relative price changes in foreign destinations competing with Mauritius tourism matters; thus indicating a certain degree of substitutability between Mauritian and its regional competitors' tourism. Tourism infrastructure, income in country of origin and the island's level of development are confirmed to be key factors in the tourist selection decision. Finally, overall, short-run estimates confirm the above results.

SSRN Electronic Journal, 2010

Efficient market stated that stock's return is indifferent in each trading day. But, the calendar... more Efficient market stated that stock's return is indifferent in each trading day. But, the calendar effects phenomenon made a different return in each single day in a week or month. This is an abnormal return which can affect investor in deciding investment strategy, portfolio selection, and profit management. This study investigates the day of the week effect, more precisely the Monday effect and the January effect on the Stock Exchange of Mauritius (SEM) in order to get the information whether these anomalies exist or not. Linear regression model, GARCH and EGARCH models are used to answer our objective. The result shows that Monday effect is nonexistent in SEM. However, we find a significant positive January effect at market level. This study also concludes that volatility shocks are persistent in both daily and monthly returns and moreover, reports the presence of leverage effect in the daily stock returns.

The Journal of Developing Areas, 2015

Using a dynamic vector error correction model, catering for dynamic, endogeneity and causality is... more Using a dynamic vector error correction model, catering for dynamic, endogeneity and causality issues, the present study addresses the important question of whether foreign direct investment in the manufacturing sector enhances the productivity of the sector in Mauritius using time series data for the period 1980-2010. The results show that FDI in the manufacturing sector has indeed contributed to both total factor productivity and labour productivity in the long run. Analysing the short run results, we found that FDI in the manufacturing sector continues to influence productivity but the impact is very small. This result was mainly explained by the massive relocation of foreign firms from Mauritius to cheap labour destinations. Also, the results confirm the presence of bicausality and feedback effects in the FDI-Productivity relationship. Moreover, it also shows that FDI is positively related to the level of domestic investment suggesting the presence of "crowding in" effect as well.

Journal of the Textile Institute, 2007

ABSTRACT Using a questionnaire-based approach, this article analyses the contribution of multinat... more ABSTRACT Using a questionnaire-based approach, this article analyses the contribution of multinationals and foreign joint ventures towards employment creation and the provision of training-an essential tool for developing indigenous skills. Most of these foreign firms were greenfield investments, hence their greater impact on employment. Furthermore, the widely held notion that multinationals and foreign joint ventures employ foreign staff for senior and managerial vacancies was not confirmed in this study. The results show that only 6% of multinationals' and only 33% of foreign joint ventures' directors are expatriates. On the other hand, the results highlighted the prevalence of indigenous workers in administrative and senior positions. In this respect the high costs of expatriates, trust, the commendable level of indigenous skills and familiarity with the local legal systems and administrative procedures proved determinant. The results also showed that there was overwhelming consensus as to the importance of training among these foreign companies' directors. All the firms in both categories, with the exception of one, do provide training. The types of training provided ranged from on-the-job training, dispensed on an ad hoc basis, to more specialised ones by staff of the parent companies. Vendor training and training by foreign as well as local private/governmental institutions were common features. Nevertheless, what is deemed more pertinent and relevant to the local economy is the transferability of the skills generated through the training dispensed by multinationals and foreign joint ventures.

Journal of International Development, 2009

An EPZ is basically no more than a device whereby imports, to be used in the production of export... more An EPZ is basically no more than a device whereby imports, to be used in the production of exports, can be acquired by manufacturers on a bonded duty-free basis. They are literally industrial zones with special incentives to attract foreign investors in which imported materials undergo some degree of processing before being exported again. The logic behind these zones was the creation of an area in which domestic policies do not hold and in which, therefore, a government could implement policies designed to enable individual firms to invest profitably on the basis of a country's comparative advantage. However, although there is significant literature on the impact of EPZs on host countries, nevertheless, the evidence has mainly been concerned with their benefits and costs and has stopped short of formal benefitcost analysis. In essence, what the empirical studies have lacked, including those done on the Mauritius Export Processing Zone (MEPZ), has been an analytical framework within which the benefits and costs of EPZs can be identified conceptually and quantified empirically. In this respect, the objective of the current paper is to formally attempt to calculate the net contribution of the MEPZ using a modified version of the enclave model put forward by Warr (1988). The results show that although Mauritius has been able to attain its objective of reducing employment and raising foreign exchange through the creation of the EPZ, yet overall the EPZ has cost more to the economy than the benefits it has conferred to the economy. This is principally because of the incentives that were given to the producers working in the EPZ sector. The costs of these incentives were higher than the overall returns obtained from the sector. The two variables that negatively contributed to the sector were domestic borrowings and electricity usage.

Connecting to Global Markets, 2014

Competence Centre on Money, Trade, Finance and Development, 2012

World Academy of Science, Engineering and Technology, International Journal of Economics and Management Engineering, 2015

This paper analyses the impact of the various enabling elements towards fostering entrepreneurial... more This paper analyses the impact of the various enabling elements towards fostering entrepreneurial behavior for two Sub Saharan African countries namely Mauritius and Botswana, with focus is on role of institutions (ministries, government support institutions, financing institutions and SME associations). Using a structural equation modeling framework, it is found that finance was some of the most determinant of respondents' evaluation of the business climate thus emphasizing on the crucial of such an ingredient. Interestingly government related factors such as government support and institutional support are also reported to have a significant influence on the SME business climate in both countries.

Journal of Travel Research, 2019

Numerous studies have focused on delineating the relationship between tourism and economic growth... more Numerous studies have focused on delineating the relationship between tourism and economic growth. In this article, we present the results of a rigorous meta-regression analysis based on 545 estimates drawn from 113 studies that empirically tested the tourism-led growth hypothesis (TLGH). The results suggest the presence of publication bias in the literature on this topic, where the majority of studies report positive and statistically significant estimates. Findings provide support for the TLGH, but they also suggest that the estimates are sensitive to a number of factors that are related to country data, specification, and estimation characteristics, and time span. Such sensitivities suggest that greater emphasis should be placed on reporting estimates of the relationship between tourism and economic growth across a variety of methodological characteristics and specification and estimation choices. The implications of the results for theory development are also discussed.

International Journal of Tourism Research, 2018

This paper in the first place attempts to assess the impact of air access liberalization on touri... more This paper in the first place attempts to assess the impact of air access liberalization on tourism development for Mauritius and secondly goes on to analyse the dual impact of the interplay between air access liberalization and marketing promotion efforts as well. Using dynamic time series analysis, namely an Autoregressive Distributed Lag (ARDL) framework over the period 1970 to 2015, the results reveal that air access liberalization is an important element for tourism development. The findings also interestingly point to the positive and significant impact of the interplay between air access liberalization and marketing promotion efforts in attracting tourist.

Review of Development Economics, 2017

This paper examines the impact of foreign real estate on land prices in Mauritius. Using a panel ... more This paper examines the impact of foreign real estate on land prices in Mauritius. Using a panel dataset comprising price, quantity and other information for a variety of luxury villas and apartments, we show that the price of land paid by locals has been pushed up by a modest 4-22% in total as a result of these developments. We also examine the determinants of the prices of the dwellings in these schemes, finding that they are strongly related to the sizes of the plots, whether they have ocean views and the desirability of the region in which they are sited, although there remains considerable unexplained heterogeneity.

Tourism Economics, 2016

The present study attempts to address the important question of whether foreign direct investment... more The present study attempts to address the important question of whether foreign direct investment (FDI) flowing into the tourism sector has served to enhance economic growth in Mauritius for the period 1984–2014. Using a dynamic vector error correction model, and catering for dynamism, the results show that tourism FDI has indeed contributed to fostering economic growth; albeit the magnitude of the coefficient being relatively smaller than FDI in the non-tourism sector. A plausible explanation for such a finding may reside in the fact that the bulk of FDI flows in the non-tourism sectors while domestic investment predominates in the tourism sector in Mauritius. The findings also demonstrate a positive relationship between tourism development and economic growth, thus supporting the tourism-led growth hypothesis.

International Business & Economics Research Journal (IBER), 2011

This paper focuses on ascertaining the strategic orientations and determinants of wholly-owned su... more This paper focuses on ascertaining the strategic orientations and determinants of wholly-owned subsidiaries in the Mauritian export-processing zone, with special emphasis on the textile and wearing apparel industry. The results show that costs minimisation, the ability to export to protected markets and the distinct possibility to evade barriers to entry imposed on their home nations were clear motivations underlying the establishment of operations by wholly-owned subsidiaries in the MEPZ. Furthermore, using regression analysis, the analysis shows that quality of infrastructure and cultural proximity were significant location determinants for MEPZ wholly-owned subsidiaries. Finally, using independent t-test, the results also highlight the greater prevalence attached by Asian firms to infrastructural provisions, cultural proximity and preferential access to developed markets in relation to their European counterparts.

This paper analyzes the performance of Mauritian mutual funds by initially investigating the perf... more This paper analyzes the performance of Mauritian mutual funds by initially investigating the performance of the mutual funds on a risk-adjusted basis and then on an individual basis with respect to their respective benchmark performances. The results show that the rankings obtained by applying both the Sharpe and Treynor rules are almost the same, implying that the funds appear to be well-diversified. Moreover, the majority of funds selected are reported to have a relatively high Sharpe ratio, thus indicating a pretty good performance. However, the positive Jensen’s alpha indicates that fund managers through their stock picking skills, privileged information or intuition have ‘beaten the market’. Individual analysis revealed that funds are heavily dependent on the performance of the local stock market, that is, they move in line with the market index. Interestingly, those mutual funds investing heavily in the local stock market are reported to ‘beat the market’.

This paper provides an analysis of return distribution properties in the presence of non-normalit... more This paper provides an analysis of return distribution properties in the presence of non-normality of returns. Using secondary data, the study examines the behavior of returns in the emerging African Stock Exchanges, such as Botswana, Ghana, Mauritius, Nigeria and South Africa for the period 1998 to 2003. The statistical results show non-normality in the return series for African markets. Also, the findings show that mean returns from all the five emerging African markets are higher than the returns for the developed markets. Nearly all markets have positive excess kurtosis, which is consistent with the stylized fact of ‘fat tails’ in equity returns. Furthermore, while the return series of African markets follow a non-normal distribution, developed markets closely approximate the normal distribution.

One of the main objectives of accounting systems is to provide investors with relevant informatio... more One of the main objectives of accounting systems is to provide investors with relevant information that may be useful in decision making for efficient resource allocation. This paper investigates the value relevance of accounting number in Mauritius through the implementation of six models. Hence, using a sample of all Mauritian firms listed on the SEM-7 for the period 1998-2005, the value relevance of book value, earnings and dividends are analyzed. Through various comparisons, the overall results of the study suggest that the Ohlson model is a better model in explaining share prices. Based on the above findings, the current issues that are hinging the stock market development along with their plausible solutions are subsequently discussed.

The Journal of Developing Areas, 2015

Governments of developing countries have been targeting poverty alleviation and deprivation as th... more Governments of developing countries have been targeting poverty alleviation and deprivation as their main goal and thus have been working for pro poor growth. It is observed that African countries need considerable amount of investment in order to help their economies to prosper. African countries can benefit from growth through foreign investment which is seen as an important source of capital flows. However, even if growth is important for an economy, it is not a good indicator of social development. Welfare can be worsen if growth attained by a country is not pro poor and can also result in an increase in inequality gap. In this regards, this study is based on the investigation on FDI and poverty alleviation or welfare maximization in selected Sub Saharan African countries. The present paper takes a different approach in analyzing the impact of FDI on poverty reduction. In the context of selected Sub Saharan African countries and over the period 1990-2010, a dynamic Panel vector error correction model is adopted. In effect the Vector autoregressive model or the vector error correction model is of great importance in showing the dynamic behavior of economic time series and for forecasting. Also, it often provides better forecasts and describes theory-based simultaneous equations models. Thus, given the endogeneity and causality issues, using such a model can prove to be highly beneficial. The main variables used are FDI net inflows and poverty headcount index. Other variables used in this study include the unemployment rate, inflation, openness, government debt and government expenditure, education level and GDP per capita. The results suggest that indeed FDI is an efficient tool in fighting poverty both in the short run and long run with the sample of countries considered. Moreover, the results favor a uni directional relationship between FDI and social welfare (poverty reduction) and a bi directional causality between FDI and economic welfare (Economic growth). According to this study, foreign investment is an important ingredient for both economic and social development for Sub Saharan African countries. Hence, the government should devise appropriate policies to attract such capital flows. These can be in terms of an improvement in institutional capacity and easier administrative procedures which would surely favor the entrance of foreign firms in the host countries.

Development Southern Africa, 2015

The present study assesses the impact of relative prices on tourism flows in Mauritius. To accoun... more The present study assesses the impact of relative prices on tourism flows in Mauritius. To account for dynamism in tourism flows modelling, a dynamic time series analysis-namely the vector autoregressive model-is employed. The results show that relative price measures have a longrun impact on international tourism flows, indicating that tourists are sensitive to price levels. The relative average cost in the different competing destinations is also reported to be positive and significant, indicating that the impact of relative price changes in foreign destinations competing with Mauritius tourism matters; thus indicating a certain degree of substitutability between Mauritian and its regional competitors' tourism. Tourism infrastructure, income in country of origin and the island's level of development are confirmed to be key factors in the tourist selection decision. Finally, overall, short-run estimates confirm the above results.

SSRN Electronic Journal, 2010

Efficient market stated that stock's return is indifferent in each trading day. But, the calendar... more Efficient market stated that stock's return is indifferent in each trading day. But, the calendar effects phenomenon made a different return in each single day in a week or month. This is an abnormal return which can affect investor in deciding investment strategy, portfolio selection, and profit management. This study investigates the day of the week effect, more precisely the Monday effect and the January effect on the Stock Exchange of Mauritius (SEM) in order to get the information whether these anomalies exist or not. Linear regression model, GARCH and EGARCH models are used to answer our objective. The result shows that Monday effect is nonexistent in SEM. However, we find a significant positive January effect at market level. This study also concludes that volatility shocks are persistent in both daily and monthly returns and moreover, reports the presence of leverage effect in the daily stock returns.

The Journal of Developing Areas, 2015

Using a dynamic vector error correction model, catering for dynamic, endogeneity and causality is... more Using a dynamic vector error correction model, catering for dynamic, endogeneity and causality issues, the present study addresses the important question of whether foreign direct investment in the manufacturing sector enhances the productivity of the sector in Mauritius using time series data for the period 1980-2010. The results show that FDI in the manufacturing sector has indeed contributed to both total factor productivity and labour productivity in the long run. Analysing the short run results, we found that FDI in the manufacturing sector continues to influence productivity but the impact is very small. This result was mainly explained by the massive relocation of foreign firms from Mauritius to cheap labour destinations. Also, the results confirm the presence of bicausality and feedback effects in the FDI-Productivity relationship. Moreover, it also shows that FDI is positively related to the level of domestic investment suggesting the presence of "crowding in" effect as well.

Journal of the Textile Institute, 2007

ABSTRACT Using a questionnaire-based approach, this article analyses the contribution of multinat... more ABSTRACT Using a questionnaire-based approach, this article analyses the contribution of multinationals and foreign joint ventures towards employment creation and the provision of training-an essential tool for developing indigenous skills. Most of these foreign firms were greenfield investments, hence their greater impact on employment. Furthermore, the widely held notion that multinationals and foreign joint ventures employ foreign staff for senior and managerial vacancies was not confirmed in this study. The results show that only 6% of multinationals' and only 33% of foreign joint ventures' directors are expatriates. On the other hand, the results highlighted the prevalence of indigenous workers in administrative and senior positions. In this respect the high costs of expatriates, trust, the commendable level of indigenous skills and familiarity with the local legal systems and administrative procedures proved determinant. The results also showed that there was overwhelming consensus as to the importance of training among these foreign companies' directors. All the firms in both categories, with the exception of one, do provide training. The types of training provided ranged from on-the-job training, dispensed on an ad hoc basis, to more specialised ones by staff of the parent companies. Vendor training and training by foreign as well as local private/governmental institutions were common features. Nevertheless, what is deemed more pertinent and relevant to the local economy is the transferability of the skills generated through the training dispensed by multinationals and foreign joint ventures.

Journal of International Development, 2009

An EPZ is basically no more than a device whereby imports, to be used in the production of export... more An EPZ is basically no more than a device whereby imports, to be used in the production of exports, can be acquired by manufacturers on a bonded duty-free basis. They are literally industrial zones with special incentives to attract foreign investors in which imported materials undergo some degree of processing before being exported again. The logic behind these zones was the creation of an area in which domestic policies do not hold and in which, therefore, a government could implement policies designed to enable individual firms to invest profitably on the basis of a country's comparative advantage. However, although there is significant literature on the impact of EPZs on host countries, nevertheless, the evidence has mainly been concerned with their benefits and costs and has stopped short of formal benefitcost analysis. In essence, what the empirical studies have lacked, including those done on the Mauritius Export Processing Zone (MEPZ), has been an analytical framework within which the benefits and costs of EPZs can be identified conceptually and quantified empirically. In this respect, the objective of the current paper is to formally attempt to calculate the net contribution of the MEPZ using a modified version of the enclave model put forward by Warr (1988). The results show that although Mauritius has been able to attain its objective of reducing employment and raising foreign exchange through the creation of the EPZ, yet overall the EPZ has cost more to the economy than the benefits it has conferred to the economy. This is principally because of the incentives that were given to the producers working in the EPZ sector. The costs of these incentives were higher than the overall returns obtained from the sector. The two variables that negatively contributed to the sector were domestic borrowings and electricity usage.

Connecting to Global Markets, 2014