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Counterfactual: Free Zone Participation in Costa Rican Economic Activity

Author

Listed:
  • Grace Huertas-Morales

    (CINDE)

  • Kerry Loaiza-Marín

    (Department of Economic Research, Central Bank of Costa Rica)

  • Laura Ortiz-Coto

    (CINDE)

Abstract

We do a computation about the impact of the Free Zone in Costa Rica. We sum the transactions amount due to firms linked to this regime conditioning on the differences for buys and sells between local firms and multinationals (MNCs). Also, we compute and add indirect effects. We use the evidence from Alfaro-Ureña, Manelici y Vásquez (2019) about productivity improvements of local suppliers to MNCs and the evidence from Huertas-Morales, Loaiza-Marín y Ortiz-Coto (2021) about higher linkages of MNCs relative to local firms. This information allow us to compute the counterfactual about how transaction amounts would diminished in Costa Rica without the firms producing in the Free Zone. We compare our results with the “Balance de Zonas Francas” published by Procomer. In general, that Balance states that the importance of the Free Zone in Costa Rica is 6.7% of GDP in 2016, while our proposed computation measures 8.18% of GDP for the same year. ***Resumen: El ejercicio que se presenta en este documento tiene por objetivo brindar una aproximación de la participación de la Zona Franca dentro de la actividad económica en Costa Rica. Para ello, se contabiliza el monto de las transacciones efectuadas por empresas vinculadas a este régimen, condicional en las diferencias en compras y ventas entre firmas locales y multinacionales. Además, se computan y añaden sus efectos indirectos. Se utiliza la evidencia de Alfaro-Ureña, Manelici y Vásquez (2019) sobre mejoras en productividad de los proveedores locales al vender a multinacionales y la evidencia de Huertas-Morales, Loaiza-Marín y Ortiz-Coto (2021) sobre mayores encadenamientos de firmas multinacionales relativo a firmas locales. Esta información permite el cómputo del contrafactual que simula cómo disminuirían las transacciones en Costa Rica sin las empresas que operan bajo el régimen de Zona Franca. Los resultados de este ejercicio se comparan con los que brinda el Balance de Zonas Francas publicado por Procomer. En general, dicho balance indica que la importancia de la Zona Franca en Costa Rica representa un 6,7% del PIB en 2016, mientras el cálculo propuesto acá señala que dicha participación es de 8,18% del PIB para el mismo año.

Suggested Citation

  • Grace Huertas-Morales & Kerry Loaiza-Marín & Laura Ortiz-Coto, 2022. "Counterfactual: Free Zone Participation in Costa Rican Economic Activity," Notas Técnicas 2204, Banco Central de Costa Rica.
    • Handle: RePEc:apk:nottec:2204
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    File URL: https://repositorioinvestigaciones.bccr.fi.cr/handle/20.500.12506/371
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    References listed on IDEAS

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    3. ., 2019. "Conclusion: a fine balance," Chapters, in: Local Accountability and National Coordination in Fiscal Federalism, chapter 9, pages 190-194, Edward Elgar Publishing.
    4. Laura Alfaro, 2017. "Gains from Foreign Direct Investment: Macro and Micro Approaches," The World Bank Economic Review, World Bank, vol. 30(Supplemen), pages 2-15.
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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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