Free Trade Zones, Liberalization, Remittances, and Tourism, for what? Jobless Growth in the Dominican Republic

• In Event: Free market, economic crisis and social impact

Abstract

The Dominican trade deficit represents around 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. Contrary to assumptions in trade theories, these facts reflect their low local productive capacity. 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. Using new Okun’s equations, it is concluded that sectors dominated by local producers and improvements in the trade balance better impact the unemployment.

Author

• Jose Caraballo-Cueto, Universidad de Puerto Rico