Socialism, Spillovers and Markets in Cuba

This article undertakes an empirical evaluation of Cuba's new development strategy placing tourism at the heart of the process of incorporating markets into a socialist system. The principal research question is whether the introduction of markets related to the Cuban tourism complex has been as successful in establishing viable backward linkages to industry as claimed. Drawing on a multitude of quantitative and qualitative sources, the article demonstrates that backward linkage building has been quite successful and even made possible a transformation of Cuba's formerly so dependent trade structures. However, there are signs that backward linkages are not as viable as could be desired. Other complementary reforms beside the introduction of markets are necessary, such as fighting soft budget constraints in user and producer firms. The article concludes that it will be difficult to fight the roots of the inherited incentive problem without initiating fundamental labour market reforms.