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

Defever, Fabrice; Riaño, Alejandro; Reyes, Jose-Daniel; Sanchez-Martin, 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 firm-level. 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.

Citation

Defever, F., Riaño, A., Reyes, J., & Sanchez-Martin, M. E. (2019). Special economic zones and WTO compliance: evidence from the Dominican Republic. Economica, 86(343), 532-568. https://doi.org/10.1111/ecca.12276

• Journal Article Type: Article
• Acceptance Date: Mar 7, 2018
• Online Publication Date: Jun 14, 2018
• Publication Date: 2019-07
• Deposit Date: Mar 13, 2018
• Publicly Available Date: Jun 15, 2020
• Journal: Economica
• Print ISSN: 0013-0427
• Electronic ISSN: 1468-0335
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 86
• Issue: 343
• Pages: 532-568
• DOI: https://doi.org/10.1111/ecca.12276
• Keywords: Special economic zones; Export share requirements; Export subsidies; Agreement on subsidies and countervailing measures; Dominican Republic
• Public URL: https://nottingham-repository.worktribe.com/output/938850
• Publisher URL: https://onlinelibrary.wiley.com/doi/abs/10.1111/ecca.12276
• Additional Information: This is the peer reviewed version of the following article: Defever, F. , Reyes, J. , Riaño, A. and Sánchez-Martín, M. E. (2018), Special Economic Zones and WTO Compliance: Evidence from the Dominican Republic. Economica. . doi:10.1111/ecca.12276, which has been published in final form at https://onlinelibrary.wiley.com/action/showCitFormats?doi=10.1111%2Fecca.12276. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.