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Free trade zones, liberalization, remittances, and tourism, for what? Jobless growth in the Dominican Republic

Jose Caraballo-Cueto ()

International Journal of Development Issues, 2016, vol. 15, issue 2, 181-200

Abstract: Purpose - The Dominican trade deficit represents almost 16% of their GDP and is insufficiently counteracted by tourism and remittances. Not even a high devaluation closed the imbalance. 80% of exports are from free trade zones. These facts reflect their low domestic entrepreneurial capacity. Design/methodology/approach - We motivate the discussion with descriptive statistics and then apply multiple time series regressions at the macro level and at the industry level. Findings - The attraction of foreign firms appears to substitute, and not complement, the building of local capacity. Regressions show that a GDP growth of 5% does not decrease the high unemployment rate. Originality/value - Using new Okun’s equations, it is concluded that sectors dominated by local producers and improvements in the trade balance better impact the unemployment. These findings challenge conventional wisdom that characterizes the Dominican economy as a "successful story".

Keywords: Latin America; Trade liberalization; Free trade zones; Jobless growth; Local producers (search for similar items in EconPapers)
Date: 2016
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