The aim of this paper is to apply some of the arguments discussed by the policy evaluation literature to industrial policy measures in developing countries. In particular, given the increasing importance they have gained in the industrial strategies of LDCs, the paper concentrates on Export Processing Zones as a tool to attract investment and foster exports and industrial development. A methodology of analysis to evaluate the effect of Export Processing Zones on the location choices of enterprises is defined by using a counterfactual approach. This means evaluating the effect of a public policy through a comparison with what would have happened without policy intervention. To this aim the paper suggests a theoretical scheme that, unlike previous evaluative attempts on EPZs, takes into account the effect of EPZs on production costs, by comparing firms inside and outside the EPZ. The scheme is then tested on the case study of Egypt, on a set of firms.