TITLE:
Foreign Direct Investment and Manufacturing Growth: The Case of Tax Incentives in Puerto Rico
AUTHORS:
Wilfredo Toledo
KEYWORDS:
FDI, Tax Incentives, Manufacturing, Structural Changes, Andrew-Quandt Test
JOURNAL NAME:
Modern Economy,
Vol.8 No.2,
February
24,
2017
ABSTRACT: The aim of this paper was to determine the effects
that the end of tax incentive for U.S. firms operating in Puerto Rico had on
the growth trend of the manufacturing sector in the island. It was found
evidence that the termination of these incentives diminished manufacturing
employment growth trend. This reduction was transmitted to Puerto Rico’s
aggregate real output. Real GNP declined at an average rate of 1.7% per year
from 2007 to 2015. Thus, it may be argued that foreign capital may stimulate
economic growth in the short run, but that increase may be artificial without
local means to be maintained in the
long run.