Program In Comparative International Development Department of Sociology Johns Hopkins University Baltimore, MD. 21218 USA Working Paper #4 U.S. BOUND IMMIGRATION AND SMALL ENTERPRISE DEVELOPMENT IN THE DOMINICAN REPUBLIC Final Report Submitted to the Commission for the Study of International Migration and Cooperative Economic Development, Congress of the United States by Alejandro Portes and Luis E. Guarnizo March 1990 PREFACE This study was undertaken to examine the linkages between the flow of remittances and the development of small enterprises in one of the principal sources of labor immigration to the United States in recent years. The working hypothesis that guided the research was that migrant remittances could play a significant role in entrepreneurial development in the source country and that indeed much migration was motivated by the need to capitalize small firms or sustain their existence. If such were the case, a program of flexible credit assistance to small entrepreneurial initiatives in the Dominican Republic may help reduce the migrant outflow, as well as stimulate immigrants already in the United States to return. This investigation fits within the general brief of the Commission for the Study of International Migration and Cooperative Economic Development, established by the U.S. Congress according to provisions of the Immigration Reform and Control Act of 1986. One of the Commission's practical goals is to explore the effects of international migration in both sending and receiving countries and to gain a better understanding of existing population movements. Because of limitations of resources and time, the present study could not be based on large and representative samples of the relevant populations and had to rely instead on a far more modest effort of data collection. For this reason, its conclusions should be regarded as tentative and subject to revision. They can not be generalized either to the Dominican immigrant community in New York or to the universe of small enterprises in the Dominican Republic. A small study can make a contribution, however, by indicating that certain events and trends do exist in reality, even if it can not estimate their relative magnitude. Put in other words, an analysis based on a small pilot sample can establish that certain cells in a given theoretical matrix are not empty. For example, it can not say how many small enterprises linked to migration exist in the Dominican Republic, but it can assert that such enterprises exist. Similarly, it can not put a number on the female owners of such enterprises, but it can establish that there are firms owned by women. More generally, a small indepth study can uncover significant aspects of the relationship between migration and the sending and receiving societies that has been so far unknown or neglected. The pages that follow summarize our findings in this regard. Overall, we were impressed by the extreme economic and social dynamism of the Dominican immigrant community and the many novel aspects uncovered during a relatively short period of time. Not all of them are included in this Report which is limited to those features for which sufficiently reliable evidence was available. Even so, the empirical results offer a portrait of Dominican migration at considerable variance with that generally accepted in academic and policy circles and different from what we ourselves had expected. Sociologist Robert K. Merton noted long ago the value of "serendipitous" or unexpected research findings and the strong reactions of enthusiasm and interest that they awaken. We have felt often this way in the course of this study, as new and so far unexplored vistas opened before us. Finally, we wish to express our gratitude to Dr. Sergio Diaz-Briquets, research director of the Commission, for his unfailing support during the course of the study. Dr. Demetrios Papademetriou of the Bureau of International Affairs, U.S. Department of Labor, provided additional support for its completion. Our relationships with these two officials have been unfailingly collegial and fruitful. In the Dominican Republic, Wilfredo Lozano, director of the Latin American School of Social Science (FLACSO), and Ruben Sili‚, a FLACSO faculty member, made possible the successful completion of field data collection through their expert guidance and supervision of the interviewing team. We are grateful to them as well as to each of FLACSO interviewers who participated in the study. Carlos Dore y Cabral, one of the Dominican Republic's foremost sociologists, lent us his expertise from the start, taking part as a consultant in the research conducted in New York City and providing valuable advice on the design of the survey of small firms in Dominican cities. He has our thanks and recognition. Finally, at Johns Hopkins, Julia Sensenbrenner, Anna Stoll and Virginia Bailey helped us in essential technical and administrative aspects of the project. We sincerely thank each of them. The study was conducted as part of the Program in Comparative and International Development of the Johns Hopkins Department of Sociology. We acknowledge the support and collaboration of members of the Program. A.P. and L.G. I. Overview: Immigration and its Types The purpose of this study is to examine the linkages between Dominican labor migration to the United States and the development of small firms in the Dominican Republic. The motivation for this study is twofold: first, to ascertain the possible effects of labor migration on the economic development of the sending country and, especially, of its small-firm sector; second, to investigate the consequences of successful small enterprise development on both the Dominican migrant outflow to the United States and on return migration. The report is divided into nine sections. They present an overall review of the existing literature about migration and development, analyze the relevance of both Dominican migration and small scale enterprise (SSE) for Dominican national development, summarize the findings of our field work, and discuss the relationships between Dominican immigrants in the United States and SSEs in the Dominican Republic. The final section presents a summary of the findings accompanied with basic theoretical models explaining the relationship between Dominican migration and national development as well as policy recommendations. For many years, orthodox economic theories reduced the discussion of linkages between advanced and Third World countries to transfers of capital and commodities. Issues such as balances of payments, exports and foreign investment dominated the theoretical landscape, seemingly exhausting the web of interrelations between countries at different levels of development. Today, we know that this is not the case. Other flows as significant as those of money and tangible commodities also interconnect nations in the global economy. Among them are the transfers and exchanges of technological information, cultural patterns and consumer expectations, and people. In recent years, sociologists of development have paid special attention to these additional linkages between countries at the center and periphery of the world economy and their possible ramifications. Each of these linkages is, in itself, a complex topic and population movements are no exception. Much of the contemporary journalistic and academic literature has characterized the present world transfers of population as essentially homogeneous, and composed of poor men and women searching for manual jobs and better economic opportunities in receiving countries. This portrait is not entirely accurate. It is true that immigrants searching for low-paid, manual employment are an important segment of transnational flows of people, but they are not the only ones. Today, it is possible to distinguish at least three other important types: 1. Immigrant professionals. This flow, labelled "brain drain" in the countries of origin, represents a significant contribution to human capital accumulation for the host nations. Between 1982 and 1988, approximately 75,000 immigrants classified as highly-skilled professionals arrived for permanent residence in the United States; an additional number were classified as skilled workers. The main countries contributing to the professional outflow to the United states were the Philippines, China (Mainland, Hong Kong and Taiwan), India, the United Kingdom, Korea and Jamaica.1 2. Immigrant entrepreneurs. These are people with some capital and business skills in their country of origin who, after immigrating, establish small enterprises in the host country. Depending on their expertise and capital, as well as on conditions in the receiving country, this type of immigrant has originated two noticeable phenomena. First, the proliferation of small retail businesses owned by foreigners in low-income urban areas, especially, innercity ghettos, which have been abandoned by domestic commercial firms due to their low profitability and high risks. Asian immigrants are well-represented in this kind of "middleman minority" phenomenon, their shops having taken over the produce distribution business in New York and become an increasingly visible part of the urban landscape in Washington, Baltimore, Philadelphia and other cities.2 Second, the dense concentration of small-scale ethnic firms in certain urban spaces which produce goods and services both for the immigrant market and the general public. These entrepreneurial concentrations, labelled "ethnic enclaves," are exemplified by Chinatown in New York and San Francisco, Koreatown in Los Angeles, Little Saigon in Orange County and Little Havana in Miami.3 3. Political refugees. These are victims of conflicts during periods of nation building or control of the state, as well as subjects of generalized racial or religious persecution. This category of immigrants is itself heterogeneous, including both upper- and upper-middle class elites displaced by social revolutions from their countries or origin, as well as poor workers and peasants fleeing from lethal internal conflicts. Between 1982 and 1988, 486,000 refugee arrivals were recorded in the United States, the principal sources being Vietnam, Cambodia, Laos, Ethiopia, Iran, Poland, Romania and Afghanistan. In 1988, for the first time, a noncommunist country, Haiti, topped the list of refugees admitted for lawful permanent residence. In earlier years, Cuba and the Southeast Asian countries had been the major beneficiaries of provisions of the Refugee Act.4 Another common misperception about migration flows from the Third World to developed countries is that they are irreversible. According to this view, migration constitutes a kind of definitive, oneway escape from misery and want. Immigrants, once they have overcome the barriers for entering the developed world, will not go back and can be expected to gradually sever their ties with the communities left behind. A number of recent studies have contradicted these expectations. Once settled in the host country, immigrant groups create an increasing web of linkages with their communities of origin which include the following: 1. Growth of the transfer of monetary and nonmonetary resources accompanied by the creation of businesses linked to these transfers. 2. Return migration, which can be either permanent, temporal, or cyclical. 3. Growth of demand for home country products, which are generally imported and distributed by immigrant enterprises. 4. Creation of social and political organizations among the expatriates which promote social activities and contribute to political parties and causes in the country of origin. Far from being an irreversible flow running away from destitution, migration is best understood as a process of network building across different countries. Social networks are the means through which workers seek to improve their economic and occupational situation and entrepreneurs to consolidate their investments and increase their profits. Researchers of all persuasions are in agreement about the rationality of individual migration decisions and their potential contribution to upward mobility. More controversial among sociologists and economists are the effects of such migration-driven networks and the resources that flow through them on the development of sending countries, in particular their economic growth and income distribution. The following section outlines the principal theoretical positions advanced on this question. II. Theories of Migration and Development Although variations abound, three basic positions about the relationship between migration, in particular labor migration, and development of the sending countries can be identified. The most favorable approach comes from neoclassical economic theory that posits that migration flows are a logical consequence of different levels of demand for labor and resulting income advantages of advanced countries over peripheral ones. Migration is positive because it tends to reduce such differences while promoting greater equilibrium in the global labor market. In his classic book on trans-Atlantic labor migration (between Great Britain and the United States) in the nineteenth and early twentieth centuries, Brinley Thomas noted how economic recessions in Great Britain resulted in substantial flows of British investment to the United States accompanied by a rise in labor demand, which stimulated labor migration to North America. Eventually, the increasing level of salaries and shrinking rates of profit stopped the flow of U.S.-bound investment, bringing labor migration to a halt and initiating return flows. In this manner, capital and labor perfectly complemented each other, maintaining a changing but predictable equilibrium in the "Atlantic system."5 The neoclassical approach also tends to be uniformly positive regarding the effect of migrant communities on the sending country: remittances can serve as investment capital, support the balance of payments and stimulate demand for goods and services produced in the country of origin. Upon their return, migrants themselves embody new technological knowledge (human capital) which can help inject new dynamism in the domestic economy. This positive assessment of migration as an equilibrium-restoring and developmental mechanism is derived from a generalized sympathy to the market and a belief that its unrestricted operation will redound in the greatest collective benefit. Migration is essentially a response to market signals and the aggregate of such individual decisions for profit determines both the course of a given flow and its stability over time.6 Little attention is paid by these views to the social underpinnings of such population movements or the role of community forces in determining their course. This rosy vision of migration is countered by a series of indepth field studies conducted in several countries. They make clear, first of all, that contrary to what used to happen in the "Atlantic system" of the nineteenth century, contemporary labor migration does not occur freely but is obstructed by a wide gamut of legal barriers erected by the host societies. Becoming a labor migrant is not exclusively a matter of individual decision in a free market because it is subject to a number of political constraints. According to Zolberg,7 it is precisely these political constraints to migration in the developed world that explain the vast differences in the remuneration to labor between sending and receiving countries. Second, major migratory flows are not coming from the poorest and least developed countries -- as would be expected from a theory which emphasizes the "reestablishment of equilibrium" -- but from countries at an intermediate level of development. Within these countries, migrants do not generally come from the poorest groups -- as again could be anticipated from an emphasis on purely economic gaps -- but from middling strata possessing a measure of education, resources and labor experience.8 The European experience with "guest workers" further demonstrated that migrants often do not go back when the receiving economies cease to provide labor incentives and that their behavior patterns and final destination depend on a complex web of factors that transcend the grasp of orthodox neoclassical predictions.9 Studies done in several countries have also produced a very ambiguous balance about effects of remittances and return migration. A number of authors have argued, for example, that remittances, instead of being oriented to productive investment exacerbate conspicuous consumption patterns of receiving families, widen social inequalities, stimulate price inflation and create additional pressures on the balance of payments due to the import of goods to satisfy the new demand.10 In addition, migrant workers seldom contribute new technological knowledge upon their return since the nature of their work abroad is menial and routine and does not generate any significant training opportunities or technical expertise. Such negative findings have reinforced a completely opposite vision to that offered by neoclassical theory. This alternative approach, grounded in orthodox Marxism, defines labor migration as another form of exploitation of the resources of poor countries by advanced capitalism, its results being uniformly negative for the sending communities.11 According to this interpretation, migration simultaneously entails loss of human resources and over-exploitation of immigrant labor, which is placed in a position of great vulnerability vis-a-vis employers in the host country. The only beneficiaries of this process are firms in receiving areas which can cut their costs and discipline their domestic work force through the hiring of cheap immigrant labor.12 Accordingly, immigrant laborers are poorly paid and their remittances barely satisfy their families' subsistence needs; in the exceptional cases where remittances exceed subsistence costs, they tend to generate conspicuous consumption and increase social inequality. Finally, the migrants' return, when it occurs, produces all sorts of social disequilibria while contributing little to the wellbeing of home communities. A rather dismal vision of the relationship between migration and development is thus counterposed to the rosy predictions of market advocates. The third position stems from modern economic sociology. This position accepts the findings that throw into question the predictions of neoclassical theory, but resists as an alternative the uniformly negative predictions posited by the critical or orthodox Marxist approach. Instead, economic sociology places its emphasis on the variability of outcomes of the migration process and on the existence of socially patterned modes of incorporation into the host society, each having different consequences for immigrant economic behavior.13 This position begins by noting that both neoclassical and Marxist analyses of labor migration are "undersocialized," that is, that they stem from an excessively individualistic view of economic behavior.14 Actors are expected to govern their conduct exclusively by prospects for market gain, regardless of its effects and the evaluations of the surrounding social context. The basic difference between both approaches is that neoclassical theory assumes a "level field" in which individuals compete with comparable amounts of market information, while Marxist theory posits a radical segmentation by different amounts of information and economic power between employers and workers. In both cases, however, unconstrained profit-seeking is the operating principle. To the contrary, economic sociology assumes that individual profit-seeking is enmeshed in a dense grid of social expectations and reciprocal obligations which constrain its scope. It is not the case that individuals behave altruistically or are guided by value considerations, although such behavior is far more common than given credit by the two previous approaches. Instead, people are restricted from engaging in too blatant a form of profit-seeking when such actions elicit disapproval, pressure and sanctions among those on whom they depend. In this manner, actors are compelled to observe the norm of reciprocity, to pattern their public conduct according to norms of common courtesy and to behave "altruistically" even in the absence of internal conviction. Mutual expectations for behavior, the accumulation of reciprocity "credits" due others for past favors and the fear of social ostracism are sufficiently powerful to guide economic action away from what would otherwise be "free" market behavior.15 This "embeddedness" of individual gain-seeking in webs of social interaction has a liberating as well as a constraining side because social relations can be the source of information and material resources necessary to succeed in market ventures. Just as unconstrained greed is negatively sanctioned, conformity to the expectations of family, group or community endows individuals with resources beyond their own grasp. This "social capital," generated through stable patterns of interaction, can be added to "material" capital (money and properties), and "human" capital (individual skills, experience and aspirations) as resources which individuals can activate in the course of market competition.16 Economic actors are bound to find very quickly that their "transaction costs" are reduced by the possession of sufficient social capital, while they are significantly increased by its absence.17 Hence, it is in the individual's interest to pay close attention to the social context in which their economic actions are embedded, a pattern which eventually generates habits of group conformity and even spontaneous altruistic behavior. In the case of migration, the economic sociology approach leads us to pay close attention to the character of the communities of origin as determinants of the type and timing of migration;18 as well as to the social contexts in which immigrants are incorporated in the host society. Depending on such contexts, immigrants of similar human capital endowments may be channelled toward very different labor market niches, with significant consequences for their mobility prospects.19 The relation of migration flows to domestic development is, from this perspective, indeterminate because it depends on the contexts greeting migrants in the host country, on their obligations to kin and friends at home, and on the binational networks created in the process. Depending on them, labor migration may have the character of a oneway "safety valve" alleviating domestic unemployment and poverty; of a "subsistence strategy" for migrant families which grow progressively reliant on cash remittances; or of a genuine entrepreneurial "engine," stimulated by transfers of capital and knowhow from migrants abroad. The state of knowledge in this field does not permit further refinements of this typology or the formulation of precise hypotheses about determinants of different outcomes. It is possible, however, to make use of the concepts outlined above to guide the inquiry into the character and effects of contemporary Dominican migration. All three theoretical perspectives just described helped orient the formulation of initial questions and the interpretation of results. Jointly they provide a rich set of points of reference to guide the analysis. We would be less than candid, however, if we did not acknowledge from the start the grounding of the study in the framework of economic sociology. We will return repeatedly to points suggested by this analytic perspective, while simultaneously highlighting the facts which bear on the two alternative theoretical positions. III. Dominican Immigration 1. Origins and Evolution In contrast to Mexico -- which has been the principal source of foreign workers to the North American economy for most of this century -- Dominican immigration is not of long standing. Prior to the midsixties, the number of Dominican immigrants was relatively insignificant. Between 1951-60 recorded immigration to the United States averaged only 990 per year, but the number jumped to 9,329 persons in the 1960s, 14,813 in the 1970s and 22,894 in the 1980s. Between 1961 and 1988, 424,582 Dominicans were admitted for legal permanent residence in the United States.20 The sudden increase in Dominican outmigration in the sixties is significant because it contradicts hypotheses about the causes of migrant labor movements derived from the neoclassical model. According to them, migration is propelled by absolute economic gaps between sending and receiving countries and, in particular, by wage differentials which labor displacements seek to attenuate.21 According to this view, Dominican labor migration -- arriving either legally or illegally -- should have been a well- established process by the nineteen sixties because the "pull" of higher U.S. wages coupled with the "push" of poor economic prospects at home existed for most of this century. Instead, the origins of the Dominican labor outflow at this late date support the alternative position that such movements depend on the history of political relationships between host and sending countries and the prior remolding of the latter's social and economic institutions.22 In the case of Dominican immigrants, the opening of the door to new migration by the Immigration Act of 1965 played a significant but not decisive role, as immigration from Western Hemisphere countries had never been seriously curtailed. More important were the events following the assassination of dictator Rafael Leonidas Trujillo in 1961, which led to the arrival in power of a group of left-leaning military officers in 1963 and a subsequent U.S.-led intervention to dislodge them. This brief, but very violent episode changed the character of Dominican society, reorienting it to North American institutions, and highlighting the subordinate position of the country within the U.S. sphere of influence. More concretely, there are indications that the State Department took steps to facilitate the issuance of visas to Dominicans during the mid-sixties as a "safety valve" in a period of turmoil and as a means to support the new U.S.-sponsored government.23 Migration is a network-driven process and once a "bridgehead" was established by a sufficient number of Dominican immigrants, the process acquired a self- sustaining character after the original politically- motivated incentives had disappeared. Table 1 presents the evolution of recorded Dominican immigration during the last three decades and compares it with those from other Caribbean countries. During the 1980s, the Dominican Republic became the sixth largest source of legal immigrants to the United States, displacing Cuba as the principal source from the Caribbean. ----------------------------------------- table 1 about here ----------------------------------------- Figures in table 1 do not represent the whole story, however, because they omit a substantial surreptitious inflow. Dominican illegal migration is not so much "undocumented" as "misdocumented": because the country lacks a land border with the United States, most wouldbe migrants require some sort of papers to enter. This can take the form of false documentation or of a valid U.S. temporary visa which is then overstayed.24 Past studies suggest that this is a major channel for unauthorized Dominican migration. Table 2 presents the evolution of nonimmigrants from the Dominican Republic admitted for temporary residence in the United States between 1975 and 1988 and compares it with similar outflows from other Caribbean countries. The Dominican outflow has doubled during this period and is at present the third largest source of tourists and other "temporary" arrivals from the region. How many of these nonimmigrants overstay their visas is in dispute. According to a demographic analysis of Warren,25 a figure between 350,000 and 400,000 appears to be the most plausible estimate of the total Dominican population residing in the United States. This estimate means that from 5 to 10 percent of the total Dominican population now lives in this country.26 The impact of this inflow is made more visible by its concentration in a few receiving areas. Unlike other Caribbean immigrants which tend to cluster in South Florida, Dominicans have made New York their principal point of destination. According to the U.S. Census for 1980, New York accounted for 78 percent of Dominicans living in the continental United States, followed by New Jersey (8 percent) and Florida (4 percent).27 ----------------------------------------- table 2 about here ----------------------------------------- Table 3 presents the evolution of preferred places of destination of Dominican immigrants between 1967 and 1988. New York City is invariably at the top, followed by San Juan and, in recent years, Bergen-Passaic, a New York suburb. In 1988, 60 percent of all newly-arrived legal Dominican immigrants chose New York City as their intended place of residence, a figure similar to that for the entire decade. This number makes Dominicans the second most geographically concentrated immigrant nationality among the ten largest arriving between 1975 and 1988 and the single largest immigrant contingent coming to New York during the same period. ----------------------------------------- table 3 about here ----------------------------------------- The web of social networks through which migration occurs is well reflected in the persistence with which newcomers choose the same destinations year after year. The presence of an established community of migrants not only facilitates further outflows, but determines their direction and final patterns of settlement. More direct evidence of the network- driven character of Dominican migration is provided by the distribution of visas for legal permanent entry in the United States. Out of a total of 27,189 new arrivals in 1988, 7,562 (27.8 percent) were exempted from national quota limits as parents, spouses and children of U.S. citizens. An additional 19,111 (70.3 percent) came under family reunification preferences of the quota system as spouses, children and siblings of U.S. citizens or permanent legal residents. Only 41 immigrants (0.1 percent) made use of occupational preferences as professionals or skilled workers.28 Personal ties rather than formal occupational qualifications are obviously the engine governing the process of emigration from the Dominican Republic. 2. Evolution of Remittances The most apparent, although not the only resources transferred by immigrants to their home country are monetary transfers sent by waged and salaried workers -- commonly known as "remittances." Nothing exemplifies best the social embeddedness of international migration than these return flows of resources because they entail the voluntary sacrifice of part of a meager and hardearned wage in order to support or improve the lot of families left behind. Immigrants invariably engage in this practice out of selfimposed value commitments, to reciprocate for past obligations, or to create such obligations in the expectation of an eventual return trip. As is the case with other sustained processes of international migration, the growth of monetary transfers from Dominican workers abroad has paralleled the increase of the labor outflow from the country. According to data from the Dominican Central Bank (DCB), family cash transfers and contributions from immigrants represented only 3.2 percent of the Gross Domestic Product in 1977, but increased to 13.2 percent in 1988. This figure does not include transfers of capital or capital goods. Table 4 shows the growing significance of migration-generated resources for the country of origin by comparing them with selected economic indicators during the period 1977-1988. It should be borne in mind that remittances figures are from DCB and that the Bank's estimates are considered very conservative. Even then, for every single year for which data are available, the flow of officially-estimated remittances exceeded total foreign aid. In 1986, for example, dollars sent by Dominican migrants abroad more than tripled those received from foreign governments and international organizations. ----------------------------------------- table 4 about here ----------------------------------------- At the aggregate level, remittances have become a kind of free social subsidy mitigating the disastrous effects on the population of the debt- induced recession of the 1980s. According to several studies, the average monthly remittance per employed immigrant in 1985 and 1986 was U.S. $170, while the minimum legal wage increased to $85.9 in 1986 from $68.3 in the previous year.29 The annual family remittance per capita of those receiving family transfers reached $408 in 1986, compared to an annual Gross Domestic Product per capita of $730 in 1987,30 and a per capita foreign debt of $571.31 Another illustration of the growing significance of immigrant remittances is presented in Figure 1 which compares the evolution of foreign exchange received by the Dominican Republic under this rubric with those earned by traditional and nontraditional exports, as well as tourism and the new Export Production Zones (EPZs). As the figure shows, receipts from remittances not only experienced a sustained increase between 1977 and 1989 but, by the latter year, matched the sum of the country's three traditional exports -- sugar, coffee and tobacco. Only receipts from tourism grew faster during this period or surpassed those from remittances in recent years. ----------------------------------------- figure 1 about here ----------------------------------------- The question remains whether this significant transfer of resources from abroad has been used exclusively to sustain dependents left behind, a pattern associated with a "subsistence" strategy of migration or if it has fanned out into new forms of entrepreneurial development. The existing research literature on Dominican migration tends to take a dim view of the role of remittances, coming much closer to the critical perspective than to that advanced by neoclassical theorists. For reasons not yet clear, most of the existing studies have been conducted in the central Cibao region of the country, rather than in the capital or other cities. With some exceptions, past studies have focused on rural outmigration despite the fact that a substantial proportion, if not the majority of Dominican international migration originates in the cities.32 This choice of samples may affect the conclusions arrived at by past research. This literature concludes, almost unanimously, that only a reduced portion of the monetary transfers and savings of migrants are devoted to productive activities. Once basic family needs are met, housing upgrading or housing purchases and the acquisition of modern appliances (most of them imported) are the most important priorities.33 When migrants invest in businesses, they do so primarily in small retail shops and personal services which generate only reduced employment, usually limited to relatives. In most cases, such businesses, managed by family members or returned migrants, do not generate enough income to support the family. This situation makes additional migration, definitive reemigration, or cyclical migration necessary.34 The research literature concludes, however, that migrants' patterns of investment and consumption can transform the social and economic structures of their communities of origin. In turn, these socioeconomic changes induce alterations in the expectations of community members and sharpen an already unequal income distribution in favor of migrant families. Because the new patterns of consumption cannot be satisfied within existing economic conditions, further migration emerges as a viable mechanism for upward social mobility. Consequently, the migratory flow of people with the necessary social connections and economic means increases. The outcome is that the larger the number of migrants that a community has, the larger the possibilities for nonmigrants to begin to migrate themselves. This pattern has also been reported for other countries of outmigration, in particular Mexico.35 In summary, the literature concludes that migration is a self-feeding process that contributes to the wellbeing of migrant families, but to the detriment of the general development of the sending communities.36 Although these findings appear valid on the surface, the character of the samples on which they are based may limit their generalizability. Clearly, migrants from modest rural origins are not likely to initiate sizable urban enterprises upon return. However, the implication that all migrant-started businesses are doomed to failure may be exaggerated. The process and outcomes of Dominican migration may be more heterogenous and an alternative sampling strategy may uncover angles neglected so far. This is the question addressed by our own research effort. Its methodology and results are presented after examining the current state of the Dominican economy. IV. The Dominican Economy in the 1980s 1. Structural Adjustment Like other Latin American countries, the Dominican Republic has been buffeted during the last decade by an economic downturn unparalleled since the Great Depression. Signs of the impending crisis began to appear in the early 1970s. Oil prices tripled in 1974, leading to economic slowdown and then decline in the major market economies. In the Dominican Republic, as in other oil-deficient Latin American countries, the recourse of choice was massive foreign borrowing that provided economic breathing space and made sustained growth possible. Foreign banks readily obliged with loans of recycled petrodollars, while hopes were expressed that an upward turn in the terms of trade would help retire the debt in the near future.37 These expectations were not met and, instead, the new oil shock of the early 1980s led to a still sharper downturn, this time without the cushion of easy foreign borrowing. The Latin American terms of trade declined from 131.4 to 94.3 ten years later; by 1985, they were only four percent higher than what they had been at the time of the Great Depression. The Dominican Republic experienced a similar evolution, with terms of trade declining from 150.2 in 1975 (1966 = 100) to 87.5 a decade later.38 Inability to meet loan payments forced the country to implement structural readjustment policies, the effects of which were profoundly recessionary. The overall goal was to increase the play of market forces and improve the balance of trade by generating an exportable surplus. The price paid, however, was negative growth rates for the first time in decades. Table 5 presents the evolution of several key indicators of the Dominican economy between 1975 and 1988. They highlight the stagnation and then retrogression of the Gross Domestic Product (GDP) in the mid-eighties, the quadrupling of the foreign debt during this period, and its proportional increase from one-third to more than two-thirds of GDP. The country's current external account was in deficit every year during this period; inflation quintupled between 1978 and 1985, declining in the next two years but increasing sharply again in the last year for which data are available. ----------------------------------------- table 5 about here ----------------------------------------- Structural adjustment policies adopted by the Dominican government under the tutelage of the International Monetary Fund switched the focus of economic development from the promotion of Import Substitution Industrialization (ISI) to agricultural and industrial export promotion. Services (mainly tourism, financial and import transactions) and the external sector (export production zones and agroexport production) have benefited significantly from this change of course. In contrast, small-scale agriculture and industrial enterprises producing for the domestic market have been negatively affected. As a result of these policies, the Dominican Republic has moved from being an exporter of traditional commodities (mainly sugar, coffee and tobacco) to become primarily an exporter of personal services (tourism) and low-wage labor (export production zones and emigration). Until the late 1970s, traditional commodity exports, particularly sugar, accounted for over 60 percent of all foreign exchange earned by the country. By 1988, however, sugar exports represented only about one-tenth of the total amount produced by the country's external sector. As shown in figure 1, the place of sugar is now occupied by family remittances, tourism and export zones' revenues which jointly accounted for 57 percent of hard currency earnings.39 The pursuit of export-oriented industrialization (EOI), which replaced the early ISI model, started in 1969 with the creation of the first export production zone in the town of La Romana. Subsequently, EPZs were opened in San Pedro de Macor¡s (1973), Santiago de los Caballeros (1974) and Puerto Plata (1983). Five other EPZs began operations in 1986-87 and, in early 1988, seven additional zones were under construction. In 1983, only 74 industrial plants were located in EPZs; by 1989, the zones housed 264 plants, 139 of them North American. This remarkable growth is understandable in the context of export facilities to the U.S. market opened by the new Caribbean Basin Initiative (CBI) and the very low domestic manufacturing wages. According to the Dominican Investment Promotion Council, the average hourly labor cost in the Dominican export zones was U.S. $0.66 in 1989, or about one-fifth of the U.S. minimum wage, fringe benefits included.40 Table 6 presents illustrative data on the growth of this model of industrialization in the Dominican Republic as well as in nearby Caribbean countries. In 1983, EPZs already accounted for one-fourth of total Dominican manufacturing employment. By 1986, their exports represented 13 percent of the country's total and 37 percent of those going to the United States. In 1989, 105,239 workers were estimated to be employed in the 16 operating EPZs. Apparel and leather products were the leading export product categories.41 ----------------------------------------- table 6 about here ----------------------------------------- The restructuring of the Dominican economy has altered dramatically the landscape of economic opportunity for both labor and capital during the 1980s. Employment growth in the EPZs did not compensate for the contraction of domestic employment, either in numbers or wages. This result is partially explained by the predilection of export plants for hiring young females, who were not previously part of the labor force and who can be paid rock-bottom wages. Older industrial workers who lost their jobs during the restructuring process have seldom found new ones in the zones. Open unemployment rates have always been high in the Dominican Republic, but they increased by ten percentage points during the 1980s, affecting close to one-third of the economically active population (EAP) in 1988. Irregular or informal employment also increased rapidly accounting, according to various estimates, from 45 to 60 percent of the total EAP during the mid-eighties.42 Wages in the two growth sectors, the export plants and tourism, were kept low by foreign competition and the hiring preferences of employers. Even salaries in the relatively insulated government sector lost 58 percent of their real buying power between 1969 and 1987, according to Central Bank figures.43 In such circumstances, many Dominican workers shifted to self-employment in the informal economy, while the recourse of choice for others was emigration. The rapid increase during the 1980s of the immigration flow initiated under U.S. auspices twenty years earlier, can be partially attributed to this situation. 2. Evolution of Small Enterprises Opportunities for profitable entrepreneurial investment have also shifted rapidly during the structural adjustment period. During the earlier ISI period, preferred investments were in industries producing for the domestic market, while in recent years they have shifted to tourism, finance and the export sector. Unfortunately, most industrial micro- enterprises are domestically oriented, lacking access to the special incentives made available to those in the EPZs. As a result, they have suffered serious setbacks. A 1989 study of small-scale enterprises in the Dominican Republic conducted by the U.S. Agency for International Development estimated that the approximately 110,000 such firms employed 19 percent of the EAP.44 These enterprises concentrated in commerce (51 percent), services (31 percent) and industrial production (18 percent). A full 50 percent employed only their owners, representing just 18 percent of the small-scale firm total work force. An important finding is the very low proportion of new starts -- 16 percent during the last year -- suggesting sluggishness in the growth of this sector. This is particularly true because small firms tend to expand primarily through new starts rather than by expansion of existing enterprises.45 Table 7 presents selected findings from this survey. ----------------------------------------- table 7 about here ----------------------------------------- In Third World countries, small-scale firms are commonly hampered in their development by external structural constraints -- namely, a domestic market restrained by high unemployment and low salaries -- and by internal constraints, such as lack of operating capital, poor management skills of owners and use of low-productivity technologies.46 In the Dominican Republic, another factor discouraging investment is the problem of an inefficient and, in many cases, nonexistent infrastructure. Businesses across the country are facing the dilemma of either providing for themselves their own electricity and water supply (formerly the domain of public services) or of going bankrupt. To stay in business, many firms have had to buy emergency generators and water pumps and to build water tanks. These increases in costs can seldom be passed on to buyers without risking significant reductions in demand. Yet, the principal factors conspiring at present against the survival and growth of small-scale firms are all rooted in the economic downturn of the 1980s and subsequent adjustment policies. A low-wage economy with high unemployment can hardly sustain an expanding small enterprise sector, especially when its products and services are directed to the popular domestic market. High inflation rates yield constant increases in input prices, not all of which can be transferred to consumers. Deficiencies in public infrastructure compound these costs. The gravity of the situation may be illustrated by the recent bankruptcy of enterprises belonging to the President and Vice-president of one of the major small-business associations. After closing his business, one of these leaders left illegally in a small boat to Puerto Rico where he plans to restart his firm.47 A peculiar distortion introduced by the inflationary economy of the eighties is the rapid growth of the price of middle class housing, coupled with an actual reduction of supply. Homes that used to be priced at $32,000 some ten years ago, cost around $64,000 at present.48 It is said that speculative demand by elements associated with the drug trade has driven up prices, but simultaneously the rising costs have driven from the market most of the country's middle class. This effect is partially reflected in the declining number of private construction permits in recent years, reported in table 5. Migrant workers in New York have also seen their possibilities for home acquisition in their country reduced because their wages do not increase at the same rhythm that Dominican housing prices do. Since housing loans have practically disappeared in the domestic market, to save the amount required for a home purchase a worker must stay longer in the United States, work more hours than ever, or abandon the project altogether. This dismal situation reinforces the predictions stemming from critical theory concerning the absence or insignificance of productive migrant investments. Dominican labor migration can be construed only as a family "subsistence" strategy because, with so many obstacles in the way of investment -- including one so modest as a house -- no one would dream of repatriating painfully-earned savings. This is one of the central questions posed to our informants in New York and the Dominican Republic. V. Methodology The limitations of time and resources for the study precluded conducting representative surveys either in the home country or among the expatriate community. Within these limits, we chose not to focus on arriving at estimates of absolute numbers -- such as the total number of immigrants or the amount of remittances that they transfer. Instead, we thought it more useful to concentrate on the dynamics of immigration and to try to gain a better understanding of the processes linking the New York Dominican community with its home country. To do this, we adopted a three-pronged strategy of data collection based, respectively, on informant interviewing, secondary data collection, and a convenience sample of Dominican enterprises linked to migration. Informants are well-placed individuals who are able to report not only on themselves, but on the character of events and processes in the communities around them. We made extensive use of informant interviewing to gain a preliminary understanding of types of labor market insertion among Dominican immigrants in New York, the destination of their transferred resources, and the economic sectors most affected in the Dominican Republic. A total of 50 informants were interviewed in New York City, Santo Domingo and Santiago. They included migrant entrepreneurs, business leaders, banking managers and government officials. Informants were assured of the confidentiality of the interview and there were almost no refusals. Based on findings from this first stage of the investigation, economic sectors were selected for the final survey. Parallel to these indepth interviews, relevant secondary information was gathered and analyzed. We relied on past empirical studies and data from both U.S. and Dominican government agencies to arrive at working figures of the size of the immigrant population and of the flow of remittances. These have been reported above. Information regarding the relationship between migration and the development of small enterprises was also collected from private foundations and official agencies serving this type of firms. The final stage of data collection was a survey of small firms linked to migration (SELMs) conducted in the cities of Santo Domingo and Santiago de los Caballeros between June and October of 1989. That such firms exist and that they are, in fact, commonplace represent a first substantive finding of the study. Although exhaustive lists do not exist from which to draw representative samples, we experienced no difficulty in locating a sufficient number for a stratified, purposive sample. The opposite problem actually presented itself, namely how to select from the existing universe and within the time limitations of the study, those units that could yield the greatest and most relevant information. To avoid having the sample "captured" by a single network of firms, we adopted two decisions: First, the sample was stratified by sector and location so that interviews were conducted in four different industries and two different cities. Second, identification of eligible firms was based on a strategy of multiple "entry points," through contacts available to individual interviewers, in order to minimize the well-known problems associated with a single snowball-chain. The overall aim was to obtain a final sample that, if not statistically representative, at least maximized variance along a number of relevant dimensions and was not confined to a single area or set of firms. In total, 113 small enterprises were included. Table 8 presents their distribution by city and sector. ----------------------------------------- table 8 about here ----------------------------------------- The research team composed of Johns Hopkins and FLACSO sociologists also decided to study firms that were somewhat larger than the more abundant, but short-lived micro-enterprises. This decision was adopted in order to examine the potential effects of migration on a small, but resilient business sector that can make nonnegligible contributions to both national production and employment. As noted in a previous section, this type of enterprises has generally been neglected in past studies of the economic effects of Dominican migration. Eligibility criteria included both capital and labor input limits. To be selected, firms had to have at least five permanent workers but no more than fifty; smaller firms were also eligible if they had a minimum capital of U.S. $5,000 (DR $30,000). This floor was set in order to eliminate the far more common, but more precarious single-employee businesses.49 To be eligible as SELMs (migration-linked enterprises), firms had to fulfill one or more of the following criteria: 1) be owned by returned migrants or migrants still living abroad; 2) be managed or staffed by returned migrants; 3) receive transfers in cash or kind from migrants abroad; 4) be acquired or started, partially or exclusively, with monies from migrant labor; 5) have major clients among Dominican migrants abroad. In order to gather comparable data, only the owner or general manager of the firm was interviewed. Table 9 presents the distribution of sampled firms according to their connection to international migration. ----------------------------------------- table 9 about here ----------------------------------------- Based on initial interviews with informants, the sample was stratified by five different economic sectors. It was soon discovered, however, that there were no SELMs in transportation, another substantive preliminary finding. Sampling was hence restricted to the remaining four sectors. The original design called for 15 interviews per sector and per city for a total of 120. A number of fortuitous circumstances, not the absence of sufficient eligible firms, made reaching this total difficult. In particular, the application of the survey coincided with well- publicized negotiations between the Dominican Republic and the United States about a Binational Tax Information Exchange Agreement. Fearing some sort of investigation into their finances stemming from this agreement, a number of owners and managers proved reluctant to be interviewed. Hence, unlike the case of informants, a number of refusals were registered among potential survey respondents. Table 8 indicates that, in Santo Domingo, manufacturing firms were underrepresented in the sample, accounting for approximately one-sixth of the total, while service enterprises represented a third of them. In Santiago, on the other hand, manufacturing and commercial firms were more abundant than those in finances and other services. These trends balance each other for a fairly even representation of all sectors in the final sample. Unlike informants, survey respondents were not asked for general information about their communities, but about specific aspects of their own firms. The survey instrument, presented in Appendix A, is divided into four sections: 1) sociodemographic information on the respondent; 2) data on her/his enterprise; 3) specific linkages of the firm to international migration; 4) respondent's attitudes and opinions. Openended questions were used generously in order to avoid premature closure of a number of significant topics. The survey was conducted by four professional interviewers under the supervision of sociologists from FLACSO-Dominicana. Interviews were checked for errors and omissions shortly after coming from the field and again at Johns Hopkins. Coding and data analysis were conducted in Baltimore. A small incidental sample, no matter how stratified, does not furnish the basis for valid generalizations, nor does it lend itself to complex statistical manipulation. Instead, the purpose of the following analysis is twofold: 1) to test null hypotheses about the existence of a particular category of individuals or units; 2) to provide an estimate of the gross order of magnitude between related categories. As explained above, the sample can answer authoritatively the question "are there zero cases of something?" because their presence in such a small total attests to their existence. Moreover, it can provide a tentative guide as to the possible relative frequency of different such categories in the relevant universe, subject to future empirical validation. VI. The Dominican Immigrant Community of New York: Preliminary Findings 1. Labor Market Incorporation In this chapter, we present findings based on informant interviews and secondary data collection conducted in New York City. We approached the Dominican immigrant community with well-conceived ideas about its social condition and labor market situation. Both past research on the topic and journalistic coverage had portrayed Dominican immigration as a manual labor outflow providing a source of low-wage workers for the economies of the areas where it concentrates. Indeed, the counterpart of its characterization as a "safety valve" or "subsistence" type of movement in the Dominican Republic is its description as "secondary labor market" immigration in the United States. A number of studies have portrayed the U.S. secondary labor market as composed of small and medium-sized enterprises with labor-intensive systems of production and operations limited to local or regional markets. To survive fierce competition, these firms keep salaries low and labor conditions harsh. Deadend jobs do not provide incentives for workers to remain with a particular employer, resulting in high labor turnover. Immigrant workers, in particular illegal ones, constitute an ideal labor pool for the secondary market because of the vulnerability built in their tenuous legal status.50 Past studies of Dominicans in New York have tended to characterize them as the prototypical secondary market immigration: confined to precarious employment in small firms, experiencing harsh conditions with minimum opportunities for upward mobility, and resigned to all of this because of the even worse conditions back home.51 This characterization led us to expect other familiar social concomitants of the secondary labor market: concentration of immigrants into ghetto-like surroundings, where ethnic entrepreneurial activity is confined to a few grocery shops and restaurants plus gambling and pervasive street drug selling. We were genuinely surprised to encounter instead a thriving entrepreneurial community with characteristics not too different from the early stages of the Cuban immigrant enclave (Little Havana) in Miami or Koreatown in Los Angeles. The core of this emerging ethnic economy is located in the Washington Heights area of Manhattan where, according to the 1980 Census, 50 percent of Dominicans living in New York resided. The description of this phenomenon may be introduced by the following portrayal by an outside observer: As Broadway cuts up through the Upper West Side of Manhattan and into Washington Heights, it gradually turns into a giant Caribbean bazaar. The avenue abounds with bodegas, farmacias, unisex beauty salons, bargain clothing outlets, restaurants serving pollo and platanos and travel agencies offering bargain [flights] to the Dominican Republic.52 There is little doubt that a large proportion of Dominican immigrant workers concentrate in the secondary labor market, but this is not the whole story. Selection bias in past samples or perhaps the penchant of social scientists to describe ethnic minorities in disparaging terms have resulted in descriptions of the New York Dominican community which are at considerable variance with tangible realities. A large proportion of this community has turned toward entrepreneurial ventures, creating in its wake a vigorous ethnic economy. Employment and participation in such firms offer to migrant newcomers an alternative to the dead-end jobs of the secondary sector. Evidence in support of this alternative characterization comes from reports by various Dominican business associations, themselves proof of prior entrepreneurial development. According to one of them, New York City hosts about 20,000 Dominican- owned businesses. According to the Federaci¢n de Comerciantes e Industriales Dominicanos en Nueva York, Dominicans own approximately 70 percent of all bodegas (corner grocery stores) in New York --with annual estimated sales of 1.8 billion dollars; they also own and operate around 90 percent of the "gypsy cabs" in Upper Manhattan, and are owners or major shareholders of three chains of Spanish supermarkets, three newspapers and even two T.V. stations.53 Allowing for a measure of prideful exaggeration in these figures, they still suggest the diversity of business initiatives in which Dominican immigrants can be found. Our field interviews in New York indicate that top members of this emerging ethnic business class have attained positions as owners or board members of sizable financial institutions, some with branches in the Dominican Republic. Others have created medium-sized export manufacturing firms, especially of high-fashion apparel. The data further suggest that this top segment of the Dominican enclave has begun to evolve into an articulate elite, with political as well as economic ambitions in the home country. At present, this elite's central objective is achieving dual citizenship in order to improve its members' bargaining position both in the United States and the Dominican Republic. These efforts have met so far with mixed results. At the other extreme of this emerging elite is the proliferation of informal immigrant enterprises, defined as those that operate outside the bounds of official regulation. Sweatshops producing garments under contract for large wholesalers, gypsy cabs, underground boutiques and restaurants form part of this sector.54 Similarly, there is little doubt that criminal activities -- particularly gambling and drugs -- are common in the immigrant neighborhoods where they find both a market and a field of investment for illicit profits. Although the significance of such activities is undeniable, it would be an exaggeration to assert that the Dominican ethnic economy is solely a front for the drug trade because it also contains a large number of legitimate manufacturing and service firms. A typology of the latter will be presented in the next section.55 For workers, the existence of an enclave economy provides an alternative mode of incorporation to the secondary sector. Although the effects of enclave employment in the Dominican case remain to be determined, it is clear that such jobs lack the feature of impersonal exploitation by outsiders, familiar in the secondary labor market. If similar experiences elsewhere provide any guide, Dominican enclave employment should be embedded in a web of ethnic relationships promoting reciprocal obligations: if owners can gain market advantage by the harder work and lower wages of coethnic employees; the latter can expect longterm gains through business apprenticeship, promotion to managerial positions, or support for their own entrepreneurial ventures.56 For immigrant entrepreneurs, access to a ready pool of labor is only one of the advantages conferred by a concentrated ethnic community. Others include a captive market for culturally-defined products and services and access to informal sources of credit. Although formal sources of finance are available to established immigrant businesses, there are significant advantages to the informal route in terms of expeditiousness and absence of paperwork. To be emphasized is that such transactions, often involving large sums of money without a single paper signed, could not take place if they were not securely ensconced in a set of common understandings, common language and mutual obligations enforced by the ethnic community.57 These patterns can be illustrated by the experiences of a Dominican businessman interviewed in the course of field work in New York. Nicol s is 38 years old and already owns five commercial shops in New York City and a finance agency (financiera) in the Dominican Republic. Nicol s relies exclusively on the informal financial system available in Washington Heights. Sometimes he acts as an investor, sometimes as a borrower. As an investor, he has gained a good reputation that enables him to collect several thousand dollars with no papers signed to be invested in his businesses in New York or Santo Domingo. These investments generally come from older salaried immigrants who do not have enough capital to initiate new ventures themselves. As a borrower, he enjoys ample credit from other well-to-do immigrants. At the moment of the interview, Nicol s had two active loans -- one for $125,000 and the other for $200,000, only one of which was accompanied by some signed papers. He was paying a monthly interest of around 2.6 percent. Nicol s has 30 employees in his permanent payroll. With the exception of two recently-arrived Central Americans, the rest of his staff are relatives, friends, or relatives of close friends back in the Dominican Republic. The case of two of Nicol s' relatives illustrate another facet of the enclave at work. Juan and Carlos both earned graduate degrees in Europe. Upon their return to the Dominican Republic, Carlos married Nicol s' sister. After several years of low earnings in their country, they sought the help of some friends through whom both were hired as temporary instructors by a Manhattan college. Once in New York, the two friends found that their incomes and possibilities for upward mobility were very dim, particularly in comparison with the situation of Dominican entrepreneurs such as Nicol s. As a result, and due to Nicol s' initiative, they both quit their jobs at the college to take over one of Nicol s' bodegas. According to their verbal agreement, Carlos and Juan will become the bodega's owners in five years. Meanwhile, they have to run the store under loose supervision of Nicol s, who collects a given percentage of the weekly profits and holds the legal property of the business. Under their agreement, the store must be open seven days a week, almost 24 hours a day, and secure an agreed minimum weekly payment to Nicol s. Overall, the agreement is entirely informal and based on mutual trust. Not one of the parties involved see any uncertainty in this kind of arrangement, since the social standing and credibility of each is the collateral securing the deal. Needless to say, people like Nicol s, who use their social capital in a wise manner, accumulate more of it. By fulfilling promises, they are guaranteed to have access to an endless supply of cheap and loyal labor. People like Carlos and Juan feel respect and appreciation for Nicol s who "gave us the opportunity of our lives." Reproducing their experience, Carlos and Juan are now planning to bring some young relatives to help them run the bodega in order to allow themselves some time to undertake other businesses. Such experiences, commonplace in the daily life of the immigrant community, can not be captured by a perspective which envisions migration as a question of labor supply and demand among individual market actors. Nor does it fit well the image of a process of relentless exploitation of workers in their country of origin and after migration. Patterns of social interaction within the immigrant community create opportunities that, if not available to everyone or in equal measure, offer to many a means of escaping the drudgery and stagnation of jobs in the secondary sector. By the same token, these relationships pave the way for exchanges of information and eventual investments in the home country, as explained below. 2. Typology of Dominican Enclave Firms Immigrant manufacturing firms in New York are concentrated in the processing of ethnic foods (sausages, dairy products) and apparel. Most apparel shops are subcontractors for wholesalers or department stores. Manufacturing enterprises represent, however, a tiny fraction compared to those in the service sector. Our research in New York identified four principal types of Dominican service enterprises which are revealing both of the dynamics of the enclave and of the means through which the immigrant community has adjusted to American society: 1. Ethnic Food Providers. These are enterprises such as corner stores (bodegas), meat markets (carnicer¡as), food packers and supermarkets specialized in the distribution of Dominican products. Their "comparative advantage" is the existence of culturally-defined consumption patterns, not satisfied by outside commercial outlets. 2. Ethnic Service Providers. These businesses specialize in services linked to social and cultural preferences of the Dominican population, and by extension of other Latin minorities. The most common are beauty salons, ethnic restaurants and discos. Several other activities common in the Dominican Republic, but illegal in the United States -- such as gambling and cockfighting -- are also included here. 3. Local Middleman Services. These enterprises act as intermediaries between the immigrant community and the host society. The typical services provided by these firms are the processing of tax forms, accounting services, immigration papers and all sorts of legal paperwork required by city, state and federal agencies. Commonly, the owners and functionaries of these firms are Dominican professionals whose degrees are not recognized by New York State licensing boards. In this manner, immigrant lawyers, doctors and teachers become tax preparers or informal paralegals. This subsector tends to spawn local political activists because of their familiarity with city and state laws and regulations. The most likely channel for local political activism are the school boards in those districts where the Dominican population concentrates. 4. Binational Middleman Services. A wide variety of businesses fall into this category. Their services help immigrants to maintain contact with their homeland and include firms such as travel agencies, financial institutions selling real estate or collecting capital investments to be invested in the Dominican Republic, remittance agencies, moving and storage companies and so forth. These firms are also often owned by professionals whose credentials are not recognized in the United States. Local and binational middleman services can be provided by a single firm. Indeed, travel agencies offering services of accounting, immigration papers, taxation, remittances, real estate in the Dominican Republic and of course, air tickets regularly advertise in Spanish newspapers and magazines in New York. Given their daily dealings with local and Dominican laws, immigrant political leaders are more likely to come from the middleman service sector than from other sectors of the enclave. In fact, the presidents of the two largest Dominican business organizations in New York are owners of this type of firms. The plurality of modes of entry into the New York economy available to Dominican immigrants also has consequences for their patterns of remittances and investments. Figure 2 presents a summary theoretical model of these relationships. Workers -- in the secondary sector or the enclave -- can be expected to remit in the form of family cash transfers (F.C.T.s) either from earnings or from some form of public assistance. As seen above, this has been the standard mode in which migrant remittances have been portrayed in the research literature. In the case of Dominicans, this description does not suffice because the presence of an entrepreneurial sector gives rise to investment capital transfers and to the acquisition of transferable business skills. The forms in which monetary and human capital are invested in the Dominican Republic depends on the changing opportunities opened by the island's economy which is contingent, in turn, on its current structure and state economic policy. As seen previously, the shift from ISI to EOI as the state-sponsored model of development changed drastically the types of opportunities available for investment, migrant or otherwise. The following sections describe how such changes have been reflected in the sector of small enterprises linked to migration. ----------------------------------------- figure 2 about here ----------------------------------------- VII. Dominican Enterprises Linked to Migration: Sample Profile This section examines characteristics of Dominican small enterprises linked to migration (SELMs) and their owners and managers. The profile is divided into two parts: the respondents themselves and the firms that they own or manage. 1. Individual characteristics The first part of the survey focused on sociodemographic characteristics of respondents: their gender distribution, age, education, occupational background and migratory experiences. Of the 113 respondents, 81 percent are owners and 19 percent managers. Our results show that migrant firms tend to be owned and administered by middle aged, relatively well-educated and stable people. The vast majority of them are married (84 percent) and over 40 years of age (87.5 percent). The average age of the sample is 42.6 years with a minimum of 22 and a maximum of 77. SELM owners and managers tend to be considerably older than the Dominican immigrant population as a whole. According to the U.S. 1980 Census, for instance, the median age of Dominicans living in New York was 25.4 years.58 By the same token, Gurak and Kritz found that the average age of the Dominican immigrant in New York was 33.8 years.59 Other research has provided average ages between the mid-twenties and the mid-thirties.60 Owners and administrators of sampled firms are also more educated than the overall immigrant and nonmigrant Dominican population. As table 10 indicates, most of them (87.5 percent) attended high school or have completed some studies beyond. Only 28.4 percent of the source Dominican population has attained similar educational levels. Results of the study by Grasmuck and Pessar (1990), reported in the table, indicate that only 17.2 percent of Dominican immigrants in New York have a college education, with an additional 47 percent having attended high school.61 The earlier 1980 Census yielded a lower figure with about one-third of Dominican immigrants in New York having at least a high school education. Regardless of the comparative estimate, it is clear that respondents in our sample represent an exceptional segment of the Dominican population possessing, relative to the latter, high levels of human capital. ----------------------------------------- table 10 about here ----------------------------------------- The distribution of the sample by sex is also important. Contrary to stereotypes of an exclusively male entrepreneurial class in Latin countries, we find that 32 respondents or 29 percent of the sample are women. Indeed, as shown in table 11, 91 percent of female respondents are owners, representing about one- third of all owners in the survey; in contrast, only 77.5 percent of male respondents were owners. To repeat an earlier caveat, this finding can not be interpreted to mean that one-third of the Dominican small entrepreneurial class is female, but instead that such entrepreneurs do exist and that their presence is nonnegligible. ----------------------------------------- table 11 about here ----------------------------------------- Gender distribution of owners by type of firm is uniform with one exception. Female owners are underrepresented in the financial sector, as table 12 indicates. In our survey, the financial sector is monopolized by males with the overwhelming majority of firms being either owned or managed by them. Male managers are more likely to be found in financial firms than in manufacturing. The few female administrators are concentrated in commerce. This finding is important because it shows that, although women are well represented in business, they are almost entirely absent from the growth sector most closely associated with the new orientation of the Dominican economy. ----------------------------------------- table 12 about here ----------------------------------------- Concerning migration status, close to 80 percent of our respondents are returned migrants, a fact representing the first "link" between their firms and international migration. As shown in table 13, women entrepreneurs are as likely to be returnees as men. This result contrasts with the reluctance to return for fear of losing a more equal status vis-a-vis men abroad, expressed by female Dominican immigrants interviewed by Grasmuck and Pessar.62 The present finding does not necessarily contradict the earlier one, but highlights the heterogeneity of the immigrant population. Working class migrant women may express fears absent among those of a higher status and able to compete in the business world. ----------------------------------------- table 13 about here ----------------------------------------- The average time spent by returnees living abroad was 12.4 years, with a median of 12. The minimum reported time was one year and the maximum 27. Looking at year of arrival, we find that eight out of ten former immigrants returned during the last decade. Table 14 indicates that the pattern is somewhat different across sexes in that women entrepreneurs tend to be more recent returnees than men. More than half of women respondents came back during the last five years, as compared with only one-third of the men. Overall, these figures suggest that the process of migration for would-be business people is not of the short cyclical type, but involves prolonged stays abroad. The relationship between such stays and the acquisition of business skills and capital will be examined in the next section. For the moment, it suffices to note that the return flow has not stopped during recent years, as evidenced by the two-fifths of the sample who did so between 1985 and 1989. ----------------------------------------- table 14 about here ----------------------------------------- Table 15 presents the occupational distribution of the returnees while working abroad. About one- fifth of current business owners were also proprietors of an enterprise in the United States and about the same proportion of current managers were also managers previously. This direct occupational transfer is part of a more general overrepresentation of the sample in the higher non-manual categories, relative to the total Dominican immigrant population. Perez, for example, reports that only 3 percent of Dominicans occupied professional or managerial positions in New York City.63 Grasmuck and Pessar estimated that high- status non-manual workers represented 6.5 percent of men and 3 percent of women in the New York Dominican community.64 The 1980 Census puts the number of manual service and industrial workers at 68 percent of the Dominican-origin labor force of New York.65 Although privileged relative to these figures, our sample of business owners and managers also contains a large proportion (50.6 percent) of former bluecollar workers. This figure indicates that it is not necessary for immigrants to have attained high-status occupations abroad in order to become small entrepreneurs at home. The relationship between occupation and the acquisition of business skills and capital in the United States will be examined in the following section. ----------------------------------------- table 15 about here ----------------------------------------- The returnees' most common reason for migrating abroad in the first place was the expected "socioeconomic improvement" brought about by the move (42 percent). The second most common reason for leaving were family considerations, namely to reunite with relatives abroad. This pattern is in line with other economic-driven migrant flows, where the high proportion seeking family reunification highlights the importance of social networks in the process.66 A significant result is that unemployment and the search for a better job were among the least important reasons for departing. This finding underscores the conclusion of prior studies that Dominican emigration is not an outflow of the poorest or occupationally redundant, but originates the desire of somewhat better-off groups to seek a more advantageous economic and social situation.67 Once in the United States, the vast majority of respondents found language to be the single major problem that they confronted, followed by general sociocultural adaptation and fear of urban violence. A full twenty-five percent, however, reported no problems at all. Table 16 presents the distribution of major reasons for returning disaggregated by sex. About one-third of respondents gave reasons linked to the lack of sociocultural adaptation. Common answers falling into this category include, "regres‚ porque este es mi pa¡s" (I returned because this is my country) and "la vida aqu¡ es m s tranquila" (life here is quieter). Women migrants were marginally more prone than men to offer sociocultural explanations for return, but the significant different is in family reasons. Four times as many women as men gave such explanations of return. In particular, women respondents expressed a very definite preference for a Dominican education for their children because of their fear of the violence and deviant behavior -- especially drug use -- that they had observed among New York youth. As a counterpart to this trend, many more men than women came back to start or expand a business. For both sexes, reasons linked to an insecure legal status in the United States played a negligible role in the decision to return. ----------------------------------------- table 16 about here ----------------------------------------- Thus far we have learned that the social profile of the typical Dominican SELM entrepreneur is that of a former immigrant, married and of mature age, with above-average educational and occupational accomplishments. He or she left for economic and family reasons and, after a decade or more, returned for the same. Among men, entrepreneurial ambitions were a prime reasons for returning, while most women did so because of their children or because they were not happy with life abroad. The process of return migration continues to our day. The characteristics of the enterprises that it spawns are examined below. 2. The Firms Table 17 presents a general description of the firms studied across cities and types of activity. The numbers confirm the small size of these enterprises, which employ only seven workers on the average and highlight the modest wages that they pay. The average worker receives a monthly compensation of U.S. $138 at the official exchange rate. The figure is this high because of the relatively high wages paid by the financieras (finance agencies), an average of U.S. $192 at the official rate in both cities. Industrial firms pay the lowest salaries and have the lowest monthly sales per worker. The average monthly salary in sampled industrial SELMs in Santo Domingo is D.R. $521 (U.S. $83), very close to the national minimum wage of D.R. $500 in 1989; in Santiago, average industrial salaries are significantly higher (U.S. $117). The difference between both cities is a reflection of variations in their respective labor markets created by the presence of export production zones (EPZ). In Santiago, small owners of industrial shops constantly blame the nearby EPZ for the higher salaries that they must pay, as well as for the scarcity of skilled labor. Because of the absence of EPZs and a larger reserve of workers, lower wages can be paid in Santo Domingo where costs of living are actually higher. ----------------------------------------- table 17 about here ----------------------------------------- Sampled firms in Santiago are older on the average (7.45 years) than those in the capital (5.94). Financial firms are the youngest with an average age of 4.1 years. Reflecting the structural changes undergone by the Dominican economy, 96 percent of all financial SELMs were created during the last decade and a full 75 percent started in the last half of the 1980s. Table 18 presents a cross tabulation of type of firm by year of foundation. The clustering of firm foundings during the last five years is partially a function of high mortality among small firms, which tends to reduce the number of those created in earlier years that survive to the present. Taking this fact into account, it is still noteworthy that financial firms are by far the most clustered in the most recent category. Manufacturing firms are both the oldest on average and the only ones dating in substantial numbers from 1974 or earlier. ----------------------------------------- table 18 about here ----------------------------------------- The large amount of capital invested for the creation of a new job in these firms is striking. Again, the smallest amount is in manufacturing and the largest in finance. In Santo Domingo, the average cost of creating a job in an industrial firm is D.R. $43,810 (U.S. $6,976), while in Santiago the average reported for manufacturing was D.R. $21,350 (U.S. $3,400). These figures appear quite high compared to those presented by organizations promoting small-scale enterprises. Studies based on 1980 data reported an average capital investment of D.R. $20,000 in the industrial sector as a whole and D.R. $3,000 for small scale manufacturing firms. Part of the discrepancy is due to inflation which pushed the real value of the peso in 1989 20 to 30 percent below the official rate. This artifact, which incidentally further reduces the real value of wages paid by these firms, does not explain the entire discrepancy. These SELMs appear better capitalized than the "typical" Dominican small firm, a fact which may reflect their continuing links with outside sources of finance. Such linkages will be explored in the next section. The existing literature on migrant-initiated enterprises have portrayed them as small in size and staffed primarily by family members. By the same token, many such enterprises are described as totally "informal," that is, involved in market operations outside the scope of state regulation. In order to examine these hypotheses, the survey instrument included questions about family labor, government registration and form of ownership. An initial caveat for this analysis is that the sample is not only unrepresentative but limited, by design, to firms larger than the typical one-person micro-enterprise. Because sampled firms are larger and presumably more stable than those comprising the bulk of the small- enterprise world, we expect their level of "formalization" -- in terms of employment and official regulation -- to be higher. Table 19 shows, however, that SELMs do indeed hire family workers -- almost two-thirds of the firms surveyed did so. Financial firms are a partial exception since less than half (43.5 percent) employ relatives. Commercial enterprises are at the opposite end, with fully three-fourths depending on kin for labor. Further analysis shows, however, that family members represent a minority of the labor force of all firms. Only one-fourth of their payroll, or an average of 1.8 workers out of seven are relatives. It is likely that kin are given positions of confidence within the firm, in line with descriptions in the small enterprise literature. Yet SELMs also hire a substantial number of outsiders. Firms in our sample gave employment to a total of almost 600 such persons. ----------------------------------------- table 19 about here ----------------------------------------- In order to pursue the analysis of informality, we looked at whether firms were registered with official agencies such as the Dominican internal revenue service, the social security institute, and the banking commission. As table 20 illustrates, most firms (73 percent) are officially registered in some governmental office. Financial service agencies once again appear the most "formal" and other services, the least. Regardless of the differences across firms, all sectors tend to be mostly formal by this measure. Of course, whether registered firms actually obey official norms regarding labor compensation, fringe benefits, taxes and the like is an open question. An appropriate conclusion based on these figures is that SELMs that have reached the level of capital accumulation present in this sample are not usually part of the fully-informal economy. ----------------------------------------- table 20 about here ----------------------------------------- Table 21 presents a breakdown of the firms by activity and type of ownership. Sixty-eight percent of the manufacturing firms hire family labor, but only 24 percent of them are actually family-owned (or at least, reported as such). Likewise, 43 percent of financial firms report the use of family labor, but not one of these firms is family owned. Overall, financial enterprises are the most thoroughly incorporated into the modern capitalist economy, with 60 percent being owned by shareholders. This sector is also among the most closely regulated by state agencies. ----------------------------------------- table 21 about here ----------------------------------------- The remaining tables examine other aspects of the integration of sampled firms into their social and economic milieu. First, we consider whether in addition to being part of the Dominican formal economy, these firms are also active in the collective representation of their interests. Owners and managers were asked whether their enterprises participated in any collective trade organization. Table 22 presents the distribution of responses by sector. Only one-third of sampled SELMs participated in any organized form of political representation, but there is considerable variability across firms. Financial enterprises are again at the forefront of public visibility, with two-thirds of those studied taking part in formal business organizations. Commercial firms fall closer to the total sample mean, while practically none of those engaged in manufacturing and other services are organized. ----------------------------------------- table 22 about here ----------------------------------------- Further analysis of these data indicate that size of the firm, as measured by monthly sales per worker, is positively associated with formal organizational membership. The relevant figures are presented in table 23. They show that among smaller firms with monthly sales up to U.S. $480 per worker, only one in ten took part in business associations. In contrast, 86 percent of those with monthly sales of U.S. $1,600 or more were members. Clearly, political participation and the defense of collective interests is the preserve of the better established small entrepreneurs. ----------------------------------------- table 23 about here ----------------------------------------- To identify the potential backward linkages of SELMs with other sectors of the Dominican economy, we asked respondents about the source and origin of their inputs and the availability of domestic credit. Questions about inputs -- raw materials, intermediary goods and products for sale -- were formulated only to owners or managers of nonfinancial firms. The distribution of their responses appears in tables 24 and 25. There is a heavy dependence on domestic wholesalers as primary suppliers, as indicated by figures in table 24. Wholesalers provide two-thirds of the firms' inputs, the rest being obtained directly from manufacturers. These figures suggest a dense set of backward linkages connecting SELMs with other productive sectors of the domestic economy. However, this is not the case. As shown in table 25, 62 percent of sampled enterprises depend on imports for more than half of their supplies. The extreme case is industry where almost half of the firms import more than 90 percent of their supplies. Commercial firms do not come far behind in dependence on imported merchandise. These results indicate that backward linkages with productive sectors are quite weak and that these SELMs -- like their owners -- are strongly outward-oriented. This is particularly true of the manufacturing sector which, despite its origins in early ISI policies, reveals itself to be part also of the internationalized economy. ----------------------------------------- tables 24 and 25 about here ----------------------------------------- The literature on small-scale enterprise development commonly asserts that lack of credit and lack of technical assistance are among the major constraints faced by this sector.68 Accordingly, the survey ascertained whether this was also true of small firms linked to migration. Results indicate that five of every ten sampled firms had received credit and that the sources were mostly domestic. The primary sources of finance were formal commercial banks and development agencies. As befits their size and formal status, the bulk of credit received by financieras came from the banks. Industrial firms have been major beneficiaries of development agency loans, in some cases at subsidized rates of interest.69 Half of industrial SELMs made use of this facility. Informal sources of credit are important only for commercial and other service enterprises. Commercial shops also make heavy use of credit-in-kind provided by wholesale distributors (casas comerciales) in the form of deferred payments for merchandise and supplies. These results indicate that small firms at the level of those included in the survey are not bereft of credit nor dependent solely on informal sources. Moreover, the bulk of credit is domestic, showing that backward financial linkages are stronger than those involving intermediate or final goods. Finally, we asked respondents whether their firms had received any sort of technical assistance. Only 13 percent answered in the affirmative. Most SELM owners and managers are not interested in this form of aid or think that they do not need it. Only 25 percent expressed the need for technical assistance, including those who had already received it. Among respondents reporting such need, two-thirds mentioned accounting and managerial assistance and only one- third raised the issue of help with new technologies. It remains to be seen whether this relative indifference to technical aid is compensated by respondents' acquisition of requisite skills either in the Dominican Republic or abroad. This subject will be explored below. To summarize, the firms included in our survey are, by design, a cut above those normally referred to as micro-enterprises. By number of employees and the average remunerations paid, sampled businesses are indeed small; but by fixed capital, investments and sales per employee they are not negligible. Although capital investments figures may be exaggerated by an artificial over-valuation of the currency, they remain significant after adjusting for this factor. Most firms are of recent vintage, especially those in the financial sector and with the partial exception of manufacturing. Most are also part of the formal economy, although there are abundant indications of informal practices in terms of family labor, lack of registration and sources of supply and credit. Financial firms tower over the others in terms of average capital investments, remunerations to labor and participation in the modern formal sector. Their recency and size is in line with the evolution of the Dominican economy and the new opportunities opened by it. Overall, the existence of these mostly migrant- initiated and migrant-administered firms leads to the rejection of blanket assertions that such initiatives are limited to precarious and poorly-capitalized micro-enterprises. Although they may represent a minority in the Dominican small-business world, they are a certain indication that migration, in general, and return migration, in particular, are associated with the emergence of entrepreneurial initiatives of sufficient weight to require attention by national development policies. VIII. The Immigrant Community and the Development of Dominican Small Enterprises This section brings together the conclusions of the two preceding ones and attempts to clarify the linkages between the Dominican immigrant community and the development of small firms in the Dominican Republic. We have seen above that immigrant activities abroad are not limited to low-wage labor, but are internally diversified. They have led to the development of an incipient, but vigorous enclave economy. We have also seen that home country small enterprises linked to migration are equally dynamic and can have a significant presence in the sectors where they concentrate. It is not clear, however, whether beyond the fact that many of these firms are operated by former immigrants, there is any significant connection between their development and the presence of the expatriate community. It is possible that such connections were severed with the return of our respondents. Alternatively, these linkages may still play a vital role in the creation and day-to-day operation of these enterprises. This is the question that the following analysis explores. 1. A Typology of Migrant Remittances Just as the economic activities of the immigrant community are internally diversified so are the possible transfers that it can make to its home country. Figure 3 presents a typology of migrant remittances elaborated on the basis of informant reports in New York and in the Dominican Republic. The point highlighted by this typology is that immigrant transfers are not limited to those commonly described in the literature. The predominant mode of transfer for immigrant workers and the few who have gained access to the U.S. public welfare system (retirees, victims of work accidents, single household heads, etc.) are indeed family-oriented small sums of money and consumer goods. The principal domestic effect of such transfers is to subsidize the living standards of the immigrants' kin, a pattern familiar from past studies. Immigrant entrepreneurs and returnees -- such as most respondents in our sample -- can carry out, however, other types of transfer, including investment capital and producer goods for use in domestic enterprises. These transfers, dismissed in the critical literature as non-existent or negligible, could play a more significant role in the domestic economy than those limited to direct consumption. The following analysis explores the incidence of such transfers and their effects in sampled firms. ----------------------------------------- figure 3 about here ----------------------------------------- 2. Migration and the Creation of Money Capital This section examines the role of immigration in the creation of liquid sources of investment from two different angles. First, the role of savings abroad - - either from wages or profits -- in the initial creation of firms. Second, the role of subsequent transfers as support for their day-to-day operations, that is, as working capital. With regard to the first, it is important to know not only if migrant savings played a role, but what use they were put to. If migrants tend to buy or inherit existing businesses rather than to create new ones, the aggregate effects of their investments would be limited at best. Accordingly, respondents were asked how their firms were started and what were the primary and secondary sources of start-up capital. Table 26 shows that four out of five SELMs were initiated by their present owner and that the remaining 20 percent were purchased or inherited. The pattern is more marked for female respondents among whom firm creation by the current owner (in the vast majority of cases, the respondent herself) reaches almost 90 percent. Table 27 indicates that in seven out of ten cases, the primary source of start-up capital was from savings abroad; only one-fourth of these SELMs were created with savings or loans acquired in the Dominican Republic. Moreover, in the majority of cases where immigrant savings were not the major capital source, they still played a contributing role as secondary investments. In total, nine out of ten SELMs depended, in one form or another, on money savings accumulated abroad for their creation. The median initial investment was D.R. $75,000 or around U.S. $12,000. The aggregate investment for all sampled firms which used savings abroad as their primary source of capital was around U.S. $1,200,000. Such figures contradict assertions in the past literature concerning the lack or insignificance of immigrant investments. ----------------------------------------- tables 26 and 27 about here ----------------------------------------- Results in table 28 show, moreover, that reliance on immigrant savings as a source of start-up capital has not been decreasing but, if anything, has increased over time. Most firm owners in our sample depended on such transfers, but the pattern is still more marked among those returning to the Dominican Republic during the last ten years than among those who came back before 1979. Reliance on capital transfers is the norm regardless of the occupations that immigrants had in the United States. However, former blue-collar and white-collar workers were somewhat less prone to have accumulated enough savings for domestic investments than former managers and proprietors. As shown in table 29, practically all in the latter category created their present enterprises by transferring resources from abroad. ----------------------------------------- tables 28 and 29 about here ----------------------------------------- The second part of the question, concerning the role of migration-linked resources as working capital for already operating firms, can be broken down into two parts: first, new investments by Dominicans living abroad; second, new resources acquired through temporary travel abroad by owners or managers resident in the Dominican Republic. The goals of such travel may be to accumulate savings through temporary wage work; to sell part of the firm's production; or to obtain loans and promote additional migrant investments. These various strategies are discussed below. Forty-two percent of sampled SELMs continued to receive capital from migrants abroad. Partners and co-owners of existing enterprises are the single largest source of working capital. As table 30 indicates, however, if immigrant relatives are added as a group, they comprise the majority of contributors of new capital inputs. Transfers from siblings are the most common, followed by those from respondents' children. Investment capital received by SELMs is not always liquid. In our sample, 57 percent of reported transfers came in money form; 37 percent were in kind -- producer goods or commodities for sale -- and 6 percent were mixed. The mean value of each transfer, as estimated by respondents, was approximately U.S. $5,400, with a median value of U.S. $3,000. The discrepancy between both figures indicates that some firms received transfers significantly higher than the majority.70 In either case, estimated individual transfers involved sizable amounts. It is not possible to calculate periodic average values because most capital investments are made at irregular intervals. As shown in table 31, 73 percent of enterprises receiving investments from abroad did so irregularly or occasionally. In many instances, capital was only remitted upon the entrepreneur's explicit request when the need for purchases arise, for special investments, in emergency cases, and so forth. ----------------------------------------- tables 30 and 31 about here ----------------------------------------- The most common way in which resources are transferred is through a trusted person travelling back to the Dominican Republic. Table 32 shows that one-third of the transfers are effected in this fashion and an additional 25 percent involve the owner travelling abroad to receive them in hand. Formal financial intermediaries are used only in a minority of cases, the most common being specialized remittance agencies. The estimated size of Dominican capital transfers contrasts markedly with the 50 to 200 dollars per month in remittances commonly reported in the past research literature.71 Moreover, capital resources received from abroad are plowed back, almost entirely, in productive investments. As indicated by figures in table 33, only 10 percent of such transfers are diverted into personal or family consumption. A full 25 percent go into investments outside of the firm (mostly for the acquisition of real estate); and the remainder is dedicated to actual firm operations. Transfers can be considered as a sort of subsidy for SELMs. A wide range of activities such as payment of salaries, rents and services; settlement of business debts; purchase of raw materials and so forth are paid with monies transferred from abroad. ----------------------------------------- tables 32 and 33 about here ----------------------------------------- The direct transfer of money capital and capital goods is the most apparent effect of international migration on the development of SELMs. The connection between labor migration and capital accumulation is not limited, however, to this form. Another channel is available for those firms linked to migration and in search of extra capital, namely periodic travel by owners or managers abroad. Temporary labor migration may occur in those cases where SELM's economic performance does not meet expectations -- due to the firm's inefficiency or an adverse economic environment -- and where connections with migrant networks permit access to temporary occupations abroad, but not to additional capital transfers. In such instances, owners may opt for taking jobs in the United States for short periods of time in order to acquire resources without which his/her firm cannot operate. A related mechanism consists of owners' periodic trips to stimulate new capital investments among immigrants. Such promotions may take place directly, through existing kin and friendship networks, or through the mediation of financial and real estate agencies (financieras) located in New York, which act as investment brokers. In this manner, migrant investors other than those originally associated with the creation of the firm are incorporated to support its expansion.72 Finally, SELM owners and managers travel abroad to sell part of their production in hard currency. Proprietors of small garment firms in the Dominican Republic regularly travel to Puerto Rico, New York and other U.S. locations to sell their products. It is common practice to have an informal contract with the buyer abroad and, in some cases, with small clothing stores. On their way back, the informal exporter fills his/her disoccupied suitcases with inputs needed for the business such as fabrics, needles and so forth. To the uneducated eye, these loaded down international travellers appear as common Dominican migrants visiting their relatives back home. In reality, they are engaged in a growing form of informal international trade, ignored or unnoticed by customs inspectors in both countries. The competitive advantage of informal Dominican exporters is, in the final analysis, the same which attracts foreign producers to the EPZs, namely the very low industrial wages paid in the Dominican Republic. To this must be added the effort of SELM owners or managers in travelling abroad which reduces transaction costs by eliminating intermediaries. In exchange, their firms receive substantial periodic injections of hard currency. Boutique owners in Santo Domingo and Santiago do not sell abroad, of course, but they also travel as a means of reducing their input costs. Thus, at the same time that Dominican garment shop owners are journeying to the United States to sell their wares, Dominican garment merchants are also travelling there to buy U.S.-made products. The latter are not purchased, however, in the open market but through informal ties with Dominican immigrant merchants and garment shop contractors in New York. Fashion and novelty are what the boutique owners are after, but their costs are also reduced by the direct character of their transactions and the low wages paid to workers in enclave garment shops. Of all the illustrations that could be offered about linkages between Dominican small firms and the immigrant community of New York, none is more poignant than this dense traffic of entrepreneurially-oriented individuals taking advantage of differential scarcities and prices. The informational resources that underlie this traffic are invariably channelled through informal networks linking places of origin and of destination. A full 67 percent of SELM owners and managers in our sample travelled abroad during the twelve months prior to the interview. As table 34 indicates, 72 percent of them travelled to New York City, 13 percent to other U.S. cities, and 11 percent to Puerto Rico. There were no significant differences in the travel destinations of male and female respondents. The average length of stay was 35 days and the median 19 days, indicating much longer periods abroad for some travellers. Table 35 presents the distribution of reasons for travelling. Those going to do business or engage in wage work represent over 50 percent, with a notable overrepresentation of males. Females were more likely to report travel for family reasons or to renew expiring visas. Respondents of either sex who travelled for business reasons did so primarily to purchase inputs abroad73 or to secure new capital through sales, investments, or wage work. These categories jointly accounted for 70 percent of business trips; the remainder is composed of individuals who own businesses in the United States. Normally, these businesses are also closely linked to those operating in the Dominican Republic. ----------------------------------------- tables 34 and 35 about here ----------------------------------------- 3. Migration and the Creation of Human Capital In addition to the transfer of money capital, equipment and merchandise, international migration may be important for the development of small enterprises through the transfer of skills necessary to operate them successfully. As seen above, the skilling potential of labor migration is a hotly debated subject, with free market analysts generally arguing in its favor and critical writers dismissing it. The latter's argument is based on the expectation that immigrants' jobs abroad involve mostly unskilled menial labor which does not teach occupants any valuable skill. However, as seen in chapter 6, Dominicans in New York are not confined to secondary sector jobs, but have entry to opportunities created by a more diversified ethnic economy. The question is whether this situation also produces transferable skills of use to small enterprise in the home country. Asked whether they had learned new skills abroad, eight out of ten returnees in the sample responded affirmatively. Table 36 shows that the pattern is the same for males and females. More important, however, is what kinds of skills were transferred and how useful they are in the respondents' current work. Knowing this would allow us to arrive at more solid conclusions regarding benefits to the local economy from human capital transfers via return migration. Accordingly, respondents were asked: "What skills that you learned abroad are you using now in your business?" Table 37 presents a breakdown of the skills reported and their use. ----------------------------------------- tables 36 and 37 about here ----------------------------------------- Eighty-five percent of those who acquired new knowledge abroad are putting it to use in their present work. Most of these useful skills are, however, relatively simple ones which do not reflect the "high-tech" transfers sometimes described in the free market literature. Only 15 percent of respondents who reported learning new skills in the United States did so in production techniques and half of them did so in a notoriously low-tech industry -- garment manufacturing. By contrast, one-third learned basic accounting and management techniques necessary to run a business. Typical answers included "aprend¡ a negociar" (I learned how to do business); "aprend¡ como administrar una discoteca/bodega" (I learned how to manage a disco or a corner store); or "aprend¡ a tratar al cliente" (I learned how to deal with customers). The remaining one-third reported mostly low-level service skills such as auto repairing, beautician's training and food preparation. Tables 38 and 39 provide some evidence that skilled transfers among returnees were more frequent the longer the stay and the higher the status of occupations held abroad. One hundred percent of respondents who lived in the United States for six years or more and 93 percent of those who held managerial positions reported having learned some occupational skill, contrasted with somewhat lower percentages among shorter-term migrants, blue-collar and clerical workers. A final indication of the usefulness of out-migration for entrepreneurial development came in answers to another question: "Where did you acquire the know-how to run this firm?" The breakdown of responses is presented in table 40. Overall, immigration provided the requisite skills for one-third of respondents; formal training and work in the Dominican Republic accounted for the remaining two-thirds. Managers were almost twice more likely to depend on human capital transferred from abroad than owners: almost half of managers, but only one-fourth of owners relied on such transfers as their main source of know-how. ----------------------------------------- tables 38, 39 and 40 about here ----------------------------------------- Results in table 40 indicate that human capital brought from the United States did not account for the emergence of the majority of sampled firms in terms of the requisite managerial or technical expertise. However, a substantial number of both owners and managers did acquire skills abroad and are putting them to use in their present work. This pattern contradicts, of course, predictions stemming from critical theory concerning the absence or insignificance of such transfers. At first glance, they lend direct support instead to the views of free market advocates. Yet, on closer inspection, the kinds of skills transferred qualify this support and provide evidence for a third alternative interpretation. The usual description in the economic literature concerning the positive effects of human capital transfers assumes that the latter are: a) of a technological nature and b) acquired while working in mainstream industries of the receiving country. To the contrary, Dominican skill transfers are mostly: a) of a commercial or managerial character; b) acquired through incorporation into an ethnic enclave. The experiences of our respondents make clear that most of them "learned how to do business" or acquired the rudiments of the garment trade by working in immigrant-owned and managed shops in the United States. Hence, the typical skill transfer does not come from high-tech mainstream companies, as portrayed in the past literature, but from small and low-tech ethnic firms. The learning is almost invariably mediated by informal networks within the enclave which bring new immigrants in contact with apprenticeship opportunities. Indeed, if our respondents had been confined to manual labor in the New York secondary labor market, the predictions of critical theory would have been, in all likelihood, supported. That they were not was not due to the alternative insertion of large numbers of Dominicans in primary-sector jobs, but rather to the bridgehead role played by their own ethnic community. Without the insertion of migrants into the web of economic relations of the enclave, it is unlikely that much learning or much skill transfer would take place. IX. Conclusions 1. Conclusions Regarding Past Theories of Migration The findings of this small study can not be used to arrive at definite conclusions concerning the competing theoretical perspectives outlined in section 2. However, results point to tendencies worth further examination in the future. If the theoretical scenario were limited to competing neoclassical and critical Marxist views of labor migration, the weight of the evidence would lean in the direction of the former. Migration does have a series of positive consequences for the individuals involved, as well as for the sending and receiving economies. This conclusion must be immediately qualified, however, by two considerations. First, it is based on an unrepresentative sample deliberately oriented toward the entrepreneurial end of both the immigrant community and the sending country. The story that emerges from this analysis does not exhaust all aspects of Dominican migration, nor is it necessarily incompatible with the more common accounts of immigrant poverty and exploitation in the United States and family subsistence alternating with conspicuous consumption in the home communities. These more negative accounts -- which support a critical stance toward the consequences of labor migration -- have been based, however, on rural origin or working class samples that do not take into account either the diversity of socio-economic origins of immigrants or the diversity of their modes of incorporation into the North American economy. In relation to the dismal conclusions arrived at by earlier research, results of this study point to an alternative path which, although followed by only a minority of immigrants, has potentially beneficial consequences for those involved as well as for their country. Our results also indicate that return migration and access to entrepreneurship in the Dominican Republic do not require an upper-class origin or high-status occupation during stays abroad. The second qualification to the endorsement of the neoclassical position is that the positive consequences of Dominican migration to the United States do not generally occur according to the script put forth by this theory. The basic story, according to the theory, is that immigration arises from international imbalances in labor supply and demand and serves to meet labor shortages in the receiving country. Migrant workers benefit from the higher wages and better working conditions abroad; they learn skills and accumulate savings with which they eventually return to positions of advantage in their own country. In the Dominican case, this story is modified, at every turn, by the presence and activities of the immigrant community itself. Immigrants do meet labor demand by New York-area firms, but those who follow to the letter that part of the script are often the least able to accumulate savings or learn skills. Instead, the best opportunities often lie with the networks of entrepreneurial activity created by earlier immigrants. Within this economic enclave, barriers of language, culture, legal status or even skin color -- so important in the outside labor market -- do not exist or are attenuated. Nor is the eventual return to the home country the one-way affair envisioned by conventional writings. Instead, immigrants seem to build a "base" abroad -- in terms of property, bank accounts, and especially business contacts -- from which to organize their return home. The result is not final departure, but rather the building of a transnational network which facilitates back-and-forth contacts including cyclical migration. Few returnees return for good; instead, they go home for business or family reasons, while relying on their "bases" abroad both as insurance and for support of their Dominican business ventures. Figure 4 outlines the sequences of labor migration as conceived by the principal theoretical positions in the field and compares them with those identified in the course of this study. ----------------------------------------- figure 4 about here ----------------------------------------- The difference between the migration paths conceived in theory and those found in reality are attributable, to a large extent, to the operation of kin and friendship networks and to the social capital that they create. From the start, migration requires the facilitational role played by such networks. They also guide the incorporation of migrants into the host labor market and can provide opportunities for subsequent upward mobility. Entrepreneurial initiatives abroad, plans for return and the external "base" on which returnees rely all depend on the existence of such informal linkages. Social capital gives rise to outcomes that could not be anticipated on the basis of calculations based exclusively on material capital or individual profit- seeking. The transformation of university professionals into store owners; the granting of loans for thousands of dollars with a handshake; a class of international informal traders who buy and sell both in New York and in the Dominican Republic are so many examples of these phenomena. The existence of such processes and the impressive dynamism of network-mediated market transactions provide general support for the point of view advanced by modern economic sociology. Its methodological corollary is that researchers would do well to avoid designs focused exclusively on individual traits or on a single class of immigrants. Instead, one must look at the relationships between immigrants of different class backgrounds and their respective communities of origin and destination. A focus on patterns of social relations among different participants in the process should yield a more dynamic portrait of migration than one based solely on individual characteristics or aggregate economic indicators. 2. Conclusions Regarding Empirical Trends The discovery of a bustling Dominican ethnic economy in New York City; the categorization of its major types of enterprises; the identification of plurality of migration-linked enterprises operating in the Dominican Republic; and the tracing of some of the binational mechanisms through which these enterprises emerge and are sustained over time comprise the principal empirical findings of this study. On their basis, it is possible to anticipate several short- and medium-term trends. Unless drastic and so far unforeseen measures are taken, the Dominican small-business enclave in New York is likely to continue to grow, expanding the employment and mobility opportunities for new immigrants as well as the economic weight of the immigrant community in the home country. The strength of binational networks already in place makes it very unlikely that the outflow from the Dominican Republic will diminish significantly in the foreseeable future. This is true even if legal avenues for migration are curtailed because an already established expatriate community will seek means to bypass new restrictions. All that would be accomplished by such policy would be to drive a larger proportion of the flow underground with the familiar negative consequences. It is not clear moreover that Dominican migration should be repressed since, aside from providing a welcome labor pool for firms in the competitive sector of New York's economy, it reinforces the growth of an entrepreneurial enclave that has infused new life in formerly decaying areas of the city. The energies of new immigrants, their motivations to succeed and their willingness to put in long hours to achieve these goals represent positive inputs in a city threatened, until recently, with economic decay and population loss.74 This positive character of Dominican migration is dependent, however, on its continuing to have an entrepreneurial element, rather than being exclusively a "safety valve" or "subsistence" flow. In other words, the process has few drawbacks to the extent that many immigrants return and that they continue to define the receiving city as a place to do business instead of an economic refuge. The back-and-forth character of Dominican immigration is illustrated in figure 5 which portrays some of the flows criss-crossing the Atlantic between place of origin and destination. Unfortunately, the continuation of the "return" leg of the process is more difficult to predict with confidence because it depends on the existence of a minimum of economic opportunities and social stability in the home country. Dominican migrants return and try their hand at business initiatives because they perceive that there are still economic niches and advantages in their country. Their current behavior may be fruitfully contrasted with that of Salvadoran or Haitian immigrants, very few of whom would return voluntarily even if they succeed economically in the United States.75 The difference is, of course, that there is very little for these immigrants to "go back to," while there are still enough points of attraction for Dominicans. The continuation or reinforcement of this return orientation is contingent on three main factors: 1) the maintenance of political democracy in the Dominican Republic; 2) the re-activation of the country's economic growth; 3) government policies that permit and encourage small enterprise development by locals and returned migrants alike. For this reason and, unlike policy recommendations that focus on how to transfer resources from the immigrants to the home government, those that follow will concentrate on how to guarantee to immigrants the free use of their resources and how to create new incentives so as to stimulate their investments and business ventures. 3. Conclusions Regarding Policy Our policy recommendations are based on the following assumptions, based on the empirical material presented in this Report: 1. The emergence of a binational economic community between the United States and the Dominican Republic is essentially benign, provided that the "going" flow does not turn into a flood and that the "returning" ones continue. 1a. Attempts to curtail U.S.-bound Dominican immigration through police measures are not likely to be effective and do not seem desirable given the economic dynamism of the immigrant community. 1b. The best means to control Dominican immigration is through measures in the sending country which stimulate nonmigrants to remain and migrants to return. 2. Migrant investments of material and human capital in small enterprises in the Dominican Republic are a reality. The expansion of such investments can play an important role in national economic development. 2a. Other things being equal, migrant entrepreneurs will have a preference for investing in their home country. 2b. Migrant return and entrepreneurial investments are contingent facts, dependent on political stability and economic opportunities at home. 2c. Government policy plays a decisive role in guaranteeing such conditions and orienting the flow of resources toward different sectors of economic activity. 3. The flow of migration-driven resources to the Dominican Republic is not homogeneous, but segmented according to the modes of incorporation of migrants in the U.S.-labor market. Policies should be fine-tuned according to the diversity of such flows. U.S. Government Policies In our view, a program of subsidized credit for small enterprise development will not put a stop to Dominican out-migration for the latter is sustained by a plurality of other forces. In this sense, the hypothesis with which this study started can be safely rejected. However, in combination with other initiatives to facilitate access to profitable opportunities for small investors, a program of subsidized credit can contribute significantly to: 1) control the size of the outflow; 2) maintain its "upward mobility" rather than "survival" orientation; 3) stimulate its cyclical character through regular returns of migrants to their home country. The rationale for such a program is based on assumptions 2a and 2b above: Given comparable opportunities, would-be entrepreneurs are likely to opt to remain at home or return. Hence, any development which furthers the opportunities for small entrepreneurship in the country of origin is also a means to reduce pressures for out-migration. Programs of credit through private agencies and organizations rather than through government bureaucracies -- in the model pioneered by Acci¢n International and the Inter- American Foundation -- appear most suitable to support the development of small enterprises. This model offers greater flexibility and capacity to reach grassroot activities than those administered by most official agencies. It should be kept in mind, however, that small firms with the capacity to keep their owners and managers at home generally exceed the size of the typical micro-enterprise aided by international agencies. Firms of the size included in our sample have the capacity to retain their staff, but they also require injections of capital of considerable magnitude. On the positive side, sampled enterprises were able to negotiate credit with formal sector sources, to meet interest payments and to keep orderly books -- characteristics not always found in single- person businesses. Hence, a program of subsidized credit for firms of this size is likely to be easier to administer and to experience a lower default rate than those oriented to more precarious businesses. Technological aid does not appear to be a high priority for our entrepreneurs but, by the same token, the figures indicate that a large proportion of them learned their skills either by working in other firms or through formal training in the Dominican Republic. These results suggest, first, that the development of small enterprises is cumulative and that existing ones possess the not generally acknowledged function of training future entrepreneurs. Second, that technological education in the country of origin also plays a major role in the process. Therefore, along with a program of subsidized credit for small firms, aid to financially strapped public technical and vocational schools is a recommended investment. A deserving example is the Dominican Institute for Technological Promotion (INFOTEP) which operates several good technical schools throughout the country. Reinforcement of technical training and the availability of local credit should go a long way toward expanding the universe of individuals able to pursue entrepreneurial initiatives at home, reducing the number of those who must go abroad in order to find them. Dominican Government Policies Much of the past literature reduced the effects of Dominican migration on national development to the volume of family cash transfers (FCTs), commonly known as remittances. Attuned to this vision and given the country's need for foreign exchange, official policies have concentrated on maximizing the inflow of monetary FCTs through official channels. Coercive measures and regulation of intermediary firms handling remittances have been put in place by the Dominican government. The most recent measure, undertaken in coordination with U.S. authorities, involves the tight regulation of New York-based remesadoras or private remittance agencies. These policies are profoundly mistaken for they run against the economic interests of migrant workers and entrepreneurs and the resilient networks that they have created. Their net result is to drive the flow of remittances further underground and to discourage migrant investments, precisely the opposite effects from those intended. To gain maximum benefit from migrant monetary and non-monetary transfers, the Dominican government should work with, not against, its immigrant community. To begin with, policies should be attuned to the heterogeneity of such transfers instead of treating them in a uniform manner. At a minimum, FCTs must be distinguished from investments of financial and human capital. A recommended policy for all financial transfers is to allow their free convertibility. At present, the Dominican peso is overvalued by a factor of 30 percent.76 In this situation, compulsory measures requiring transfers to be converted at the official exchange rate become a heavy tax on immigrants and are doomed to failure. Allowing free convertibility will have the familiar effect of increasing the flow of transferred resources through official intermediaries rather than through the black market. Another recommended measure is to allow migrants abroad, as well as firms created by returned migrants, to open domestic bank accounts denominated in dollars. Through these accounts, not granted to other nationals, monetary transfers can be made.77 Foreign exchange deposited in these accounts may be converted into domestic currency at a free rate. The balance may also be taken out of the country without major controls. This program should be limited to Dominican permanent residents abroad and returnee entrepreneurs able to demonstrate a prolonged length of stay out of the country in order to discourage its frivolous usage. Its major advantage would be to facilitate FCTs and capital investments, providing the government simultaneously with a ready pool of foreign exchange. Its major disadvantage is its potential use for capital flight. The latter, however, is already taking place through numerous channels that escape government control. Specific policies designed to stimulate the transfer of family-oriented resources from migrant workers abroad should target the housing sector. Speculative demand has driven housing prices in urban areas beyond the reach of many immigrants, with negative consequences for their families as well as for the domestic housing industry. Because housing continues to be the investment of choice for immigrants of modest means, the government housing authority, in cooperation with private industry, should design a program for the construction of attractive residences at reasonable prices. Note that, unlike subsidized low-cost housing for the domestic poor, the proposed program is for mid-priced residences affordable to dollar-earning migrants. Through economies of scale in construction, a well- designed program that attracts migrant investment should be profitable. Transferred dollars for down payments should be freely convertible and a reasonable schedule of dollar or peso-dominated amortizations should be worked out. As important as incentives for family transfers are those oriented to potential investors. The fact that migrants return and invest today, despite bureaucratic barriers and a difficult economic environment, is an encouraging sign that a large potential for future capital investments exists. A number of measures may be taken by the government to activate this potential and channel it toward productive sectors. Copying the laws used to promote foreign investment (Nos. 299 and 861), migrant investors in selected sectors should be exempted from paying taxes on incomes resulting from enterprises in which the initial investment is from savings abroad. Income tax exemptions could also be prorated when migrant savings funded only part of the original investment. The exemption should be for a specified number of years. Aside from stimulating new investments, this measure should have the additional effect of channelling them through officially- sanctioned channels. Results from our survey indicate that migrant capital transfers in recent years have been strongly oriented toward the creation of firms in the financial sector. This orientation reflects the new opportunities for profitable investments associated with the shift of governmental policy away from import substitution industrialization. One of the main losers of this shift has been the domestically- oriented manufacturing sector, where most small productive enterprises are located. Accordingly, manufacturing has not been a favored investment for migrant entrepreneurs in recent years. There is no reason, however, why small industrial enterprises can not be incorporated into the current export promotion effort, nor why special incentives should not be given to those producing simultaneously for the domestic and export markets. One of the most significant findings of the study in this regard is the survival of many migrant-linked industrial firms by selling part of their production abroad through informal channels. In a sense, these firms have created their own export promotion policy. Such spontaneous initiatives should be brought above board and encouraged. The repatriation of migrant financial and human capital and its reorientation toward productive activities can be significantly accelerated by extending to them the same regime of incentives applied to foreign firms in the EPZs. Such incentives include the usual exemptions from custom duties on imported machinery and inputs and from taxes on profits. In addition, however, the government's council for export promotion should create a specialized agency to inform small industrialists of changing patterns of demand abroad and to help market their products. Several highly successful export economies, such as those of Hong Kong and Central Italy, have been created on the basis of cooperative arrangements between government agencies and networks of small entrepreneurs.78 Government agencies have provided support in the form of training programs, subsidized credit, and marketing facilities. Small entrepreneurs have provided their ingenuity, capacity for hard work, and social capital through their informal networks. A government bent on export promotion and having access to a potentially significant sector of migrant- initiated small enterprise should do well in studying these experiences carefully. Space for export-oriented mini-industries can be reserved in existing EPZs or specialized new ones may be created for this purpose. Credit can be provided through a new matching program: for a given amount of dollars that migrants are committed to invest, the Central Bank through the Fondo de Inversi¢n para el Desarrollo Econ¢mico (FIDE) would offer a matching credit. To qualify, capital would have to be remitted through an official channel such as the Banco de Reservas with branches in the United States. Finally, conventional export marketing strategies should be complemented by awareness and collaboration with the immigrants' business community abroad. Our data indicate that most small-industry informal exports occur through networks having their base in the New York business enclave. Such binational networks should be carefully preserved as small-firm exports are brought above ground. In synthesis, the best hopes that the Dominican government has to actualize the potential of past migration for future economic development consists of working through the structure and the logic of the immigrant community rather than against them. The surprising achievements of Dominican immigrants both, in the United States and after return, despite the absence of official protection, should inspire policies that build on their ingenuity and resources instead of conspiring against them. Unfortunately, governments have been so far more adept at policing and controlling than at supporting popular economic initiatives. This is, in part, the reason for recommending the private channelling of U.S. credit programs in support of small enterprise development. However, should authorities be able and willing to adopt a more flexible strategy, along the lines suggested above, small industry and especially those firms initiated with migrant capital and know-how can be expected to play a significant role in the success of their export model of development. Footnotes 1. The figure of 75,000 is probably an under- estimate because it refers only to those immigrants admitted under the third preference of the 1965 Immigration Act, reserved for professionals. Immigrants coming under other categories of the law can also possess high occupational credentials. In 1988, for example, 45,188 new immigrants were classified as professionals or technicians and an additional 20,014 as executives, managers, and administrators. These figures are comparable to those recorded in prior years. They would yield an alternative estimate of high-level manpower gain of approximately 420,000 between 1982 and 1988. See U.S. Immigration and Naturalization Service, Statistical Yearbook of the Immigration and Naturalization Service (Washington, DC: U.S. Government Printing Office, 1989), p. 40. Alejandro Portes and Rub‚n G. Rumbaut, Immigrant America: A Portrait (Berkeley: University of California Press, 1990). 2. Illsoo S. Kim, New Urban Immigrants: The Korean Community in New York (Princeton, NJ: Princeton University Press, 1981); P.G. Min, "Ethnic Business and Economic Mobility: Korean Immigrants in Los Angeles," Paper presented at the meetings of the American Sociological Association (Atlanta, August 1988); Ivan Light, "Immigrant and Ethnic Enterprise in North America," Ethnic and Racial Studies, vol. 7, 1984, pp. 195-216. 3. Min Zhou and John R. Logan, "Returns on Human Capital in Ethnic Enclaves: New York's Chinatown," American Sociological Review, vol. 54, no. 5, 1989, pp. 809-820; Ivan Light and Edna Bonacich, Immigrant Entrepreneurs: Koreans in Los Angeles 1965-1982 (Berkeley and Los Angeles: University of California Press, 1988); Rub‚n G. Rumbaut, "The Structure of Refuge: Southeast Asian Refugees in the United States, 1975-85," International Review of Comparative Public Policy, 1989; Alejandro Portes and Leif Jensen, "The Enclave and the Entrants: Patterns of Ethnic Enterprise in Miami Before and After Mariel," American Sociological Review, vol. 54, 1989, pp. 929-949. 4. U.S. Immigration and Naturalization Service, Statistical Yearbook of the Immigration and Naturalization Service (Washington, DC: U.S. Government Printing Office, 1988, 1987, 1986). 5. Brinley Thomas, Migration and Economic Growth: A Study of Great Britain and the Atlantic Economy (London: Cambridge University Press, 1973), Part III. 6. See George J. Borjas, "Economic Theory and International Migration," International Migration Review, vol. XXIII, no. 3, 1989, pp. 457-485. 7. Aristide Zolberg, "The Next Waves: Migration Theory for a Changing World," International Migration Review, vol. XXIII, no. 3, 1989, pp. 403-430. 8. Douglas S. Massey, Rafael Alarc¢n, Jorge Durand and Humberto Gonzalez, Return to Aztl n: The Social Process of International Migration from Western Mexico (Berkeley and Los Angeles: University of California Press, 1987); Alejandro Portes and Alex Stepick, "Unwelcome Immigrants: The Labor Market Experiences of 1980 Mariel and Haitian Refugees in South Florida," American Sociological Review, vol. 50, 1985, pp. 493-514. 9. Stephen Castles, "The Guest-Worker in Western Europe: An Obituary," International Migration Review, vol. 20, 1986, pp. 761-778. 10. Robert E. Rhoades, "Intra-European Return Migration and Rural Development: Lessons from the Spanish Case," Human Organization, vol. 37, 1978, pp. 136-147; Patricia Pessar, "The Role of Households in International Migration and the Case of U.S.-Bound Migration from the Dominican Republic," International Migration Review, vol. 16, 1987, pp. 342-364; Sherri Grasmuck and Patricia Pessar, Between Two Islands: Dominican International Migration (Berkeley, CA: University of California Press, 1990); Massey et. al., Return to Aztl n. 11. W.R. B”hning, Studies in International Labour Migration (London: Macmillan, 1984); Mario Barrera, Race and Class in the Southwest: A Theory of Racial Inequality (Notre Dame, IN: Notre Dame University Press, 1980); Robert L. Bach, "Mexican Immigration and the American State," International Migration Review, vol. 12, 1978, pp. 536-558. 12. Manuel Castells, "High Technology, Economic Policies, and World Development," BRIE Working Paper (University of California-Berkeley, May 1986); Castles, "The Guest-Workers in Western Europe"; Alejandro Portes, "Toward a Structural Analysis of Illegal (Undocumented) Immigration, International Migration Review, vol. 12, 1978, pp. 469-484. 13. Alejandro Portes and Jozsef B”r”cz, "Contemporary Immigration: Theoretical Perspectives on its Determinants and Modes of Incorporation," International Migration Review, vol. XXIII, no. 3, 1989, pp. 606-630; Saskia Sassen, The Mobility of Labor and Capital: A Study in International Investment and Labor Flow (Cambridge: Cambridge University Press, 1988). 14. Mark Granovetter, "Economic Action and Social Structure: The Problem of Embeddedness," American Journal of Sociology, vol. 91, no. 3, 1985, pp. 481-510. 15. Granovetter, "Economic Action"; Robert G. Eccles and Harrison C. White, "Price and Authority in Inter-Profit Center Transactions," American Journal of Sociology, vol. 94, Supplement, 1988, pp. 17-51. 16. James S. Coleman, "Social Capital in the Creation of Human Capital," American Journal of Sociology, vol. 94, Supplement, 1988, pp. 95-120. 17. Oliver E. Williamson, The Economic Institutions of Capitalism (New York: Free Press, 1985). 18. Ina R. Dinnerman, "Patterns of Adaptation among Households of U.S.-Bound Migrants from Michoacan, Mexico," International Migration Review, vol. 12, 1979, pp. 485-501; Massey et. al., Return to Aztl n; Grasmuck and Pessar, Between Two Islands. 19. Portes and Rumbaut, Immigrant America, Ch. 3; Light and Bonacich, Immigrant Entrepreneurs. 20. U.S. Immigration and Naturalization Service, Statistical Yearbook. 21. Borjas, "Economic Theory." 22. Alejandro Portes, "Migration and Underdevelopment," Politics and Society, vol. 8, 1978, pp. 1-48; Portes and B”r”cz, "Contemporary Immigration"; Sassen, The Mobility of Labor and Capital. 23. Grasmuck and Pessar, Between Two Islands; Victor Grimaldi, El Diario Secreto de la Intervenci¢n Norteamericana de 1965 (Santo Domingo, DR: Amigo del Hogar, 1989). 24. An exception is the direct illegal flow through a third country. The most common route is via Puerto Rico. In this case, migrants cross the Mona Passage aboard small boats or "yolas" and disembark surreptitiously on the Puerto Rican coast. Many illegal Dominicans stay in this island, but those with social contacts and greater resources fly to New York. Because Puerto Rico is part of the United States, no immigration formalities need to be observed (see Jorge Duany, "Dominican Immigrants in the Puerto Rican Labor Market," Paper presented at the Seminar on Informal Sector and Social Movements in the Caribbean, FLACSO, Social Science Research Council (Santo Domingo, DR, January 1990). Another route used by illegal migrants is through Mexico. This route entails a more complex organization, higher cost and dangers and a longer journey. After flying into Mexico, migrants cross illegally the U.S.-Mexican border (see Francisco B ez and Francisco D'Oleo, La Emigraci¢n de Dominicanos a Estados Unidos: Determinantes Socio-Econ¢micos y Consecuencias (Santo Domingo, DR: Editora Taller, 1986)). 25. Robert Warren, "Datos sobre la Legalizaci¢n y Otra Informaci¢n Estad¡stica Acerca de la Inmigraci¢n Dominicana a los Estados Unidos," Fundaci¢n Freidrich Ebert (Santo Domingo, DR, 1989). 26. The latest official figure available of total legal and illegal Dominican immigrants in the United States is 169,147 for 1980 (U.S. Bureau of the Census, 1980 Census of the Population, (Washington, DC: U.S. Bureau of Census, 1984: table 1)). A wide range of "guesstimates," ranging from 300,000 up to one million can be found in the literature. 27. U.S. Bureau of the Census, 1980 Census. 28. U.S. Immigration and Naturalization Service, Statistical Yearbook, 1989, tables 5, 7. 29. Franc Moya Pons, "Informe Preliminar de la Encuesta de Migraci¢n a los Estados Unidos," Forum, vol. 27, 1988, pp. 15-31; B ez and D'Oleo, La Emigraci¢n de Dominicanos. 30. Calculation based on families of five members. 31. The World Bank, Dominican Republic: Its Main Economic Development Problems (Washington, DC: The World Bank, 1978). 32. Pessar, "The Role of Households in International Migration"; Sebastian Ravelo and Pedro del Rosario, Impacto de los Dominicanos Ausentes en el Financiamiento Rural (Santiago, DR: Centro de Investigaciones, Universidad Cat¢lica Madre y Maestra, 1986); Eugenia Georges, "Distribuci¢n de los efectos de la migraci¢n internacional sobre una comunidad de la Sierra Occidental Dominicana," in La Inmigraci¢n Dominicana en los Estados Unidos, (eds.) Jos‚ del Castillo and Christopher Mitchell (Santo Domingo, DR: CENAPEC, 1987); David Bray, "La agricultura de exportaci¢n, formaci¢n de clases y mano de obra excedente: El caso de la migraci¢n interna e internacional en la Rep£blica Dominicana," in La Inmigraci¢n Dominicana en los Estados Unidos, (eds.) Jos‚ del Castillo and Christopher Mitchell (Santo Domingo, DR: CENAPEC, 1987). 33. Some studies have been conducted on urban settings, both in Dominican cities and in New York. See Sherri Grasmuck, "The Consequences of Dominican Urban Outmigration for National Development: The Case of Santiago," in The Americas in the New International Division of Labor, ed. Steven E. Sanderson (New York: Holmes & Meier, 1985); Grasmuck and Pessar, Between Two Islands; B ez and D'Oleo, La Emigraci¢n de Dominicanos; Douglas T. Gurak and Mary M. Kritz, "Dominican and Colombian Women in New York City: Household Structure and Employment Patterns," Migration Today, vol. X, no. 3-4, 1982, pp. 14-21. One study was conducted aboard airplanes flying between New York and Santo Domingo. See Moya Pons, "Informe Preliminar de la Encuesta de Emigraci¢n." 34. Grasmuck, "The Consequences of Dominican Urban Outmigration"; Frank Mills, "Determinants and Consequences of the Migration Culture of St. Kitts- Nevis," in When Borders Don't Divide, (ed.) Patricia Pessar (New York: Center for Migration Studies, 1988). 35. Massey et. al., Return to Aztl n. 36. Grasmuck, "The Consequences of Dominican Urban Outmigration"; Ravelo and del Rosario, Impacto de los Dominicanos; Bray, "La agricultura de exportaci¢n." 37. Enrique Iglesias, "The Latin American Economy during 1984: A Preliminary Overview," CEPAL Review, vol. 25, 1985, pp. 7-44. 38. Carlos Massad, "Alleviation of the Debt Burden: Historical Experience and Present Need," CEPAL Review, vol. 30, 1986, pp. 17-34; Fundaci¢n Econom¡a y Desarrollo, Impacto del Sector Privado en la Econom¡a Dominicana (Santo Domingo, DR: Acci¢n Empresarial, 1989). 39. Fundaci¢n Econom¡a y Desarrollo, Impacto del Sector Privado; Banco Central de la Rep£blica Dominicana, Bolet¡n Mensual, vol. XLI, no. 10, October 1988. 40. Investment Promotion Council, Working to Make Your Business Work: Investing in the Dominican Republic (Santo Domingo, DR: Investment Promotion Council, October 1989), p. 2. 41. Investment Promotion Council, Working to Make Your Business Work; Gregory Schoepfle and Jorge F. Perez-Lopez, "Export Assembly Operations in Mexico and the Caribbean," Journal of Inter-American Studies and World Affairs, vol. 31, Winter 1989, pp. 131-161. 42. PREALC, Mercado de Trabajo en Cifras, 1950- 1980 (Santiago de Chile: International Labour Office, 1982); Beverly Lozano, "High Technology, Cottage Industry," Ph.D. dissertation (Department of Sociology, University of California, Davis, 1985); Alejandro Portes, "Latin American Class Structures: Their Composition and Change During the Last Decades," Latin American Research Review, vol. 20, 1985, pp. 7- 39; Michael Kleinekathoefer, El Sector Informal Integraci¢n o Transformaci¢n (Santo Domingo, DR: Fundaci¢n Freidrich Ebert, 1987). 43. Fundaci¢n Econom¡a y Desarrollo, Impacto del Sector Privado, table 14. 44. AID used a locational definition of "micro- enterprise" as any firm located in poor or lower middle class barrios. 45. U.S. Agency for International Development/Rep£blica Dominicana, Microempresas in the Dominican Republic (Santo Domingo, DR: USAID/Rep£blica Dominicana, 13 March 1989). 46. J. Ashe, The Pisces II Experience: Local Efforts in Micro-Enterprise Development (Washington, DC: Agency for International Development, 1985), VI; B. Sanyal, "Urban Informal Sector Revisited," Working Paper No. 1, Urban Informal Sector and Small-Scale Enterprise (Rosslyn, VA: Inter-American Foundation, 1986). 47. Project field interview, 15 June 1989. 48. Camara Dominicana de la Construcci¢n, Bolet¡n CADOCON, July 1980, July 1981, September 1986 (Santo Domingo, DR: CADOCON); project field interviews, 23 June 1989, 27 June 1989 (Santiago, DR, Santo Domingo, DR). 49. FIDE, the official Dominican government agency providing credit for small scale industries, defines them as those with a maximum capital of U.S. $47,800 (D.R. $300,000) and an investment per job not higher than U.S. $3,185 (D.R. $20,000). See Fondo de Inversiones para el Desarrollo Econ¢mico (FIDE), Pol¡tica Crediticia Programa para el Desarrollo y Forento de la Peque¤a Empresa (Santo Domingo, DR: Banco Central, circa 1989). A study undertaken by the Technological Institute of Santo Domingo (Instituto Tecnol¢gico de Santo Domingo (INTEC), Diagnostico del Sector Industrial y de las Peque¤as Empresas en Rep£blica Dominicana (Santo Domingo, DR: INTEC, 1982)) defined small enterprises as productive units with more than five and less than fifty employees and an investment per job of R.D. $10,000 or less. See Fundaci¢n APEC de Cr‚dito Educativo, Inc., Necesidades de Adiestramiento y Capacitaci¢n de las Peque¤as Empresas (Santo Domingo, DR: APEC, February 1988). In 1989, AID used a locational definition, as explained in footnote 44. 50. Richard Edwards, Contested Terrain: The Transformation of the Workplace in the Twentieth Century (New York: Harper Torchbook, 1979); P.B. Doeringer, "Gender, Skill, and the Dynamics of Women's Employment: Comment," Conference, "Gender in the Work Place" (The Brookings Institution, November 1984); Alejandro Portes and Robert L. Bach, Latin Journey: Cuban and Mexican Immigrants in the United States (Berkeley: University of California Press, 1985). 51. Glenn Hendricks, The Dominican Diaspora: From the Dominican Republic to New York City, Villagers in Transition (New York: Teachers College Press, Columbia University, 1974); Glauco P‚rez, "The Legal and Illegal Dominican in New York," Conference, "Hispanic Migration to New York City: Global Trends and Neighborhood Change" (New York University, November 1981); Douglas T. Gurak and Mary M. Kritz, "Los Patrones de Migraci¢n de los Dominicanos y Colombianos en la Ciudad de Nueva York: El Rol de las Redes de Parentesco," in La Inmigraci¢n Dominicana en los Estados Unidos, (ed.) Jos‚ del Castillo and Christopher Mitchell (Santo Domingo, DR: CENAPEC, 1987); Douglas T. Gurak, "Family Formation and Marital Selectivity Among Colombian and Dominican Immigrants in New York City," International Migration Review, vol. 21, no. 2, 1987, pp. 275-297; Evelyn S. Mann and Joseph J. Salvo, "Characteristics of New Hispanic Immigrants to New York: A Comparison of Puerto Rican and Non-Puerto Rican Hispanics," Paper presented at the annual meeting of the Population Association of America (Minneapolis, Minnesota, May 1984); Grasmuck and Pessar, Between Two Islands. 52. Michael Massing, "Crack's Destructive Spring Across America," The New York Times Magazine, 1 October 1989, p. 38. 53. Field interviews, March-April 1989. 54. As a personal illustration, after a field trip to Washington Heights by one of the investigators, he was transported back to downtown by a "gypsy limousine service" owned and operated by Dominican immigrants. 55. For a discussion of the interrelationships between formal, informal, and illicit economies in New York's ethnic neighborhoods, see Saskia Sassen, "New York's Informal Economy," in The Informal Economy: Studies in Advanced and Less Developed Countries, (eds.) Alejandro Portes, Manual Castells and Lauren Benton (Baltimore: The Johns Hopkins University Press, 1989), pp. 60-77. 56. Alex Stepick, "Miami's Two Informal Sectors," in The Informal Economy: Studies in Advanced and Less Developed Countries, (eds.) Alejandro Portes, Manual Castells and Lauren Benton (Baltimore: The Johns Hopkins University Press, 1989), pp. 111-131; Vittorio Capecchi, "The Informal Economy and the Development of Flexible Specialization in Emilia-Romagna," in The Informal Economy: Studies in Advanced and Less Developed Countries, (eds.) Alejandro Portes, Manual Castells and Lauren Benton (Baltimore: The Johns Hopkins University Press, 1989), pp. 189-215; Alejandro Portes, "The Social Origins of the Cuban Enclave Economy of Miami," Sociological Perspectives, vol. 30, 1987, pp. 340-372. 57. Light, "Immigrant and Ethnic Enterprise"; Min and Logan, "Returns on Human Capital." 58. Mann and Salvo, "Characteristics of New Hispanic Immigrants." 59. Gurak and Kritz, "Los Patrones de Migraci¢n," "Dominican and Colombian Women." 60. P‚rez, "The Legal and Illegal Dominican"; Moya Pons, "Informe Preliminar"; Antonio Ugalde and Thomas C. Langham, "International Return Migration: Socio-Demographic Determinant of Return Migration to the Dominican Republic," in Return Migration and Remittances: Developing a Caribbean Perspective, (eds.) W.F. Stinner, K. de Albuquerque and R.S. Bryce- Laporte (Washington, DC: Smithsonian Institution, 1982), pp. 73-95. 61. Grasmuck and Pessar, Between Two Islands. 62. Grasmuck and Pessar, Between Two Islands. 63. P‚rez, "The Legal and Illegal Dominican." 64. Grasmuck and Pessar, Between Two Islands. 65. U.S. Bureau of the Census, 1980 Census. 66. Massey et. al., Return to Aztl n. 67. Ugalde and Langham, "International Return Migration"; Bray, "La agricultura de exportaci¢n"; Pessar, "The Role of Households." 68. Sanyal, "Urban Informal Sector"; R.E. Liz, "La Problematica de la Peque¤a Empresa," Paper presented to the seminar "Necesidades de Adiestramento y Capacitaci¢n de las Peque¤as Empresas" (Universidad Madre y Maestra, Santo Domingo, 19 February 1988); AID, Microempresas in the Dominican Republic. 69. According to a 1989 study, ADEMI (Asociaci¢n para el Desarrollo de la Microempresa), the largest Dominican agency promoting small firms, charges a 70 percent interest rate per year. Commercial banks lend at 45 percent (Fundaci¢n Econom¡a y Desarrollo, "Cr‚ditos en la Informalidad," List¡n Diario, 9 September 1989, Santo Domingo, D.R.). 70. The arithmetic mean is sensitive to extreme values, while the median is not. The higher mean value, in this case, indicates the "pull" of some disproportionately high transfers. 71. B ez and D'Oleo, La Emigraci¢n de Dominicanos; Grasmuck, "The Consequences of Dominican Urban Outmigration"; Grasmuck and Pessar, Between Two Islands; Gurak and Kritz, "Los Patrones de Migraci¢n," "Dominican and Colombian Women"; Moya Pons, "Informe Preliminar"; Georges, "Distribuci¢n de los efectos de la migraci¢n"; Ravelo and del Rosario, Impacto de los Dominicanos. 72. Dominican-based financieras, in turn, send their representatives to New York to sell properties or collect dollars to be lent in the Dominican Republic. Such operations generally pass unnoticed by official regulators. In the case of small finance firms, it is the owner or general manager who travels. Normally, transactions are made through family or social connections and are finalized in New York. 73. Several respondents indicated that they travelled as often as every two months to keep their stocks updated. 74. See Saskia Sassen-Koob, "The New Labor Demand in Global Cities," in Cities in Transformation: Class, Capital, and the State, (ed.) Michael Peter Smith (Beverly Hills: Sage Publications, 1984), pp. 139-171; Saskia Sassen, "New York's Informal Economy." 75. See Alex Stepick, Haitian Refugees in the U.S. (London: Minority Rights Group Ltd., Report No. 56, 1986); Terry A. Repak, "And They Come on Behalf of Their Children: Central American Families in Washington, D.C.," Conference on Migration (The U.S. Department of Labor, September 1988); Edelberto Torres-Rivas, "Report on the Conditions of Central American Refugees and Migrants," Center for Immigration Policy and Refugee Assistance, Georgetown University (Washington, DC, 1985); Segundo Montes-Mozo and Juan Jos‚ Garc¡a V., Salvadoran Migration to the United States: An Exploratory Study (Washington, DC: Center for Immigration Policy and Refugee Assistance, Georgetown University, 1988). 76. The official rate is D.R. $6.5 to the dollar; the parallel rate is D.R. $8.4 as of March 15, 1990. 77. This proposed measure would be different from the "certidolar," which was a certificate of deposit redeemable in dollars, guaranteed by the Dominican Mortgaging Bank. 78. Capecchi, "The Informal Economy"; Manuel Castells, "Small Business in a World Economy: The Hong Kong Model, Myth and Reality," in The Urban Informal Sector: Recent Trends in Research and Theory," Conference proceedings, Department of Sociology, The Johns Hopkins University (Baltimore, MD, 1984), pp. 161-223, Mimeo; U. Sit, S. Wong and T.S. Kiang, "Small Scale Industry in a Laissez-Faire Economy," Working Paper, Centre for Asian Studies, University of Hong Kong (Hong Kong, 1979), Mimeo.