Does the Elimination of Export Share Requirements Matter for Export Performance? Evidence from the Dominican Republic

Alejandro Riaño , University of Nottingham

Government incentives contingent on export performance are prohibited by the World Trade Organization under the Agreement on Subsidies and Countervailing Measures. This paper studies the effect that the removal of export share requirements in special economic zones (SEZ) had on export performance in the Dominican Republic. Using detailed customs data for the period 2006 to 2014, we investigate how firm and product-level export outcomes were affected by the two waves of elimination of export requirements – the first in 2007, which only affected firms producing leather, textiles and apparel and footwear, the so-called ‘national priority’ sectors, and a second one taking place in 2011 and across the board. We find that the removal of export requirements increased the attractiveness of SEZ after the reforms. SEZ became more important in terms of the number of exporters, while firms outside the zones in priority sectors did not expand sufficiently despite the fact that they benefitted from the extension of fiscal and tariff concessions that were previously only available in SEZ. Following the reforms, SEZ firms in non-priority sectors also tended to export more products. Overall, our findings suggest that at least in the short-run, achieving greater compliance with WTO rules regarding subsidies has not helped to reduce the Dominican Republic’s reliance on SEZ – if anything, removing export requirements while maintaining fiscal incentives in SEZ has cemented their importance in the country’s export basket.

About the speaker
Alejandro Riaño is an Assistant Professor of economics at the University of Nottingham and an internal fellow at the Nottingham Centre for Research on Globalisation and Economic Policy (GEP), the Centre for Finance, Credit and Macroeconomics (CFCM) and a research affiliate of CESifo. He received his PhD in economics from Penn State University in 2009, and prior to that was a research fellow at the research deparment of the Inter-American Development Bank in Washington, DC. He is originally from Colombia. His research explores how individuals and firms adjust to globalization. His current work focuses on three overarching themes: (i) Documenting and quantifying the effects of export promotion policies on welfare and competitiveness, (ii) investigating the extent to which greater reliance on external markets affects firms’ real and financial volatility, and (iii) Exploring how trade openness and offshoring affect labor market outcomes, such as wage inequality and informality in developing countries.

Venue: Conference room

Date: 22 October 2015

Time: 12:30 - 13:30