Journal of Economics and Finance

, Volume 41, Issue 3, pp 610–629 | Cite as

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

Article
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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.

Keywords

Free trade zone Dominican Republic Uneven growth 

JEL Classification

F14 F21 F15 
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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  1. 1.Department of Finance, College of BusinessUniversity of AkronAkronUSA

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