Institutional Challenges in the Development of the World’s First Worker-Owned Free Trade Zone

Abstract

The theory of grounded comparative institutional advantage offers a framework for examining institutions that advantage and disadvantage specific types of economic activity in particular places. A case study of a Nicaraguan women’s sewing cooperative, the world’s first worker-owned free trade zone, reveals contradictory institutional biases both promoting and inhibiting exports. Formal institutions, e.g. regulations forcing the coop to form a noncooperative business to benefit from CAFTA, and informal institutions, such as an NGO assisting the women cope with CAFTA Tariff Preference Levels, gain credit, and control inventory, form the complex web that small actors must navigate to export their goods.

Keywords::

• comparative institutional advantage
• free trade zones
• fair trade
• cooperatives