The Impact of Trade and Foreign Direct Investment Liberalization in the Dominican Republic

This research examines the effects of international trade and foreign direct investment (FDI) liberalization policies on the economy of the Dominican Republic during 1990s using a production function methodology. The regression results indicate evidence of unbalanced growth characterized by regional and technological dualism: (a) an efficient free trade zone (FTZ), 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. Trade and FDI liberalization policies to promote sustained growth and development are not adequate because: (a) the implemented policies failed to establish economic linkages between different economic sectors, and (b) the FTZ's contribution to GDP averages only about 3%