^*Laura Jaramillo and Cemile Sancak are economists in the IMF's Western Hemisphere and Fiscal Affairs Departments, respectively. The authors would like to thank Guy Meredith, Jeromin Zettelmeyer, and Andy Wolfe for their encouragement and support. We also thank Dan Holmes, Juan Climent, Chris Towe, Luis Cubeddu, and participants at the Western Hemisphere Department seminar and growth workshop for their useful comments. Volodymyr Tulin provided valuable research assistance.

Abstract

The Dominican Republic and Haiti share the island of Hispaniola and are broadly similar in terms of geography and historical institutions, yet their growth performance has diverged remarkably. The countries had the same per capita real GDP in 1960, but, by 2005, the Dominican Republic's per capita real GDP had tripled, whereas that of Haiti had halved. Drawing on the growth literature, this paper explains this divergence through a combined approach that includes a panel regression to study growth determinants across a broad group of countries, and a case study framework to better understand the specific policy decisions and external conditions that have shaped economic outcomes in the Dominican Republic and Haiti. This paper finds that initial conditions cannot fully explain the growth divergence, but rather policy decisions have played a central role in the growth trends of the two countries.