September, 2003

Extending the Analysis

Dominican Republic. An Assessment of the USAID Investors Roadmap and a New Institutional Economics Perspective on the Barriers to Entrepreneurship
  • Diego Aycinena

    Associate Professor of Economics, Universidad del Rosario
  • David Harper, Andres Marroquin

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The objective of this report is to identify the impediments to entrepreneurship that exist in the Dominican Republic. The framework applied in this study derives from New Institutional Economics (NIE) and theories of entrepreneurship and market processes. The approach applies qualitative, ethnographic research methods. The key development issue for the Dominican economy is not so much a scarcity in the supply of entrepreneurship per se, but rather the allocation of entrepreneurial talent to uses that are either blatantly unproductive (e.g. ‘excessive’ lobbying to stave off competition) or that do not make the greatest possible contribution to the creation of wealth in the country over the long-term. A common instance of this in the Dominican Republic is the ‘excessive’ small-scale entrepreneurship in the informal economy where the growth of businesses is less constrained. It should be noted that the ‘flow’ of entrepreneurial talent into unproductive uses and the informal economy is rational and profit-maximizing relative to the existing set of regulations. Our point is that we believe that a superior allocation of entrepreneurial talent--that would make a much greater contribution to Dominican prosperity -- could be induced by a more robust institutional framework. This report also emphasizes the systemic nature of this problem.

 

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