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Foreign direct investment in the Dominican Republic: consequences and recommendations for sustainable growth

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  • Harri Ramcharran

    (University of Akron)

Abstract

This research, using a production function methodology, examines the effects of international trade and foreign direct investment (FDI) liberalization policies on the economy of the Dominican Republic during the 1990s. Most of the FDI was in the free trade zone (FTZ) sector. The results have important ramifications on current policies to promote sustainable economic growth. The econometric results indicate evidence of unbalanced growth characterized by regional and technological dualism: (a) an efficient FTZ sector, highly dependent on FDI, and operating under increasing returns to scale, and (b) a relatively inefficient primary/secondary sector operating under decreasing returns to scale. These growth strategies fail to establish economic linkages between different economic sectors; also they focus on the development of the FTZ sector whose contribution to GDP averages only about 3 %. Policies to promote sustainable growth necessitate strategies to develop and diversify the primary/service sectors. Importantly, recently revised agreements on international trade will lessen the competitiveness of the FTZ sector.

Suggested Citation

  • Harri Ramcharran, 2017. "Foreign direct investment in the Dominican Republic: consequences and recommendations for sustainable growth," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 41(3), pages 610-629, July.
    • Handle: RePEc:spr:jecfin:v:41:y:2017:i:3:d:10.1007_s12197-016-9361-y
    DOI: 10.1007/s12197-016-9361-y
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    More about this item

    Keywords

    Free trade zone; Dominican Republic; Uneven growth;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F15 - International Economics - - Trade - - - Economic Integration

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