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Special economic zones and WTO compliance: evidence from the Dominican Republic

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  • Defever, Fabrice
  • Reyes, Jose-Daniel
  • Riaño, Alejandro
  • Sánchez-Martín, Miguel Eduardo

Abstract

Special economic zones (SEZ), one of the most important instruments of industrial policy used in developing countries, often impose export share requirements (ESR). That is, firms located in SEZ are required to export more than a certain share of their output to enjoy a wide array of incentives - a practice prohibited by the World Trade Organization's Agreement on Subsidies and Countervailing Measures. In this paper we exploit the staggered removal of ESR across products and over time in the SEZ of the Dominican Republic - a reform driven by external commitments to comply with WTO disciplines on subsidies - to evaluate how ESR effect export performance at the product- and firmlevel. Using customs data on international trade transactions from the period 2006 to 2014, we find that making the Dominican SEZ regime WTO-compliant made SEZ more attractive locations for exporters to be based in. The reform, however, did not have a significant effect on the country's exports nor on the share of export value originating from SEZ

Suggested Citation

  • Defever, Fabrice & Reyes, Jose-Daniel & Riaño, Alejandro & Sánchez-Martín, Miguel Eduardo, 2017. "Special economic zones and WTO compliance: evidence from the Dominican Republic," LSE Research Online Documents on Economics 86614, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:86614
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    1. Defever, Fabrice & Reyes, José-Daniel & Riaño, Alejandro & Varela, Gonzalo, 2020. "All these worlds are yours, except india: The effectiveness of cash subsidies to export in nepal," European Economic Review, Elsevier, vol. 128(C).
    2. Ronald B. Davies & Rodolphe Desbordes, 2018. "Export Processing Zones and the Composition of Greenfield FDI," Working Papers 201807, School of Economics, University College Dublin.
    3. Fabrice Defever & Alejandro Riano & Gonzalo Varela, 2020. "Evaluating the impact of export finance support on firm-level export performance: Evidence from Pakistan," Discussion Papers 2020/05, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    4. Yang Liu & Yidan Jin, 2022. "Special economic zones, export status, and firms’ productivity: Theory and evidence from China," Review of Development Economics, Wiley Blackwell, vol. 26(3), pages 1338-1360, August.
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    6. Andrés Rodríguez‐Pose & Federico Bartalucci & Susanne A. Frick & Amelia U. Santos‐Paulino & Richard Bolwijn, 2022. "The challenge of developing special economic zones in Africa: Evidence and lessons learnt," Regional Science Policy & Practice, Wiley Blackwell, vol. 14(2), pages 456-481, April.
    7. Defever, Fabrice & Riaño, Alejandro, 2022. "Firm-destination heterogeneity and the distribution of export intensity," Economics Letters, Elsevier, vol. 219(C).

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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