Kiel Working Papers, Kiel Institute for World Economics
No 1231:
Pro-poor Growth in Bolivia: Accounting for External Shocks and Policy Reforms
Jann Lay, Rainer Thiele and Manfred Wiebelt
Abstract: This paper analyzes how major external shocks and policy
reforms affect Bolivia’s ability to achieve pro-poor growth. Employing a
recursive-dynamic CGE model, it considers three different scenarios: an
optimistic baseline scenario that roughly extrapolates the situation
prevailing before the onset of the recent economic crisis; a more realistic
scenario that accounts for two important negative external shocks
(declining capital inflows and El Niño); and a scenario that captures the
combined effect of the shocks and two major reform projects (development of
the gas sector and deregulation of the urban labor market). It turns out
that the shocks have not only contributed to the economic crisis, but that
they are also likely to impair Bolivia’s medium-term development prospects,
leading to marked increases in both urban and rural poverty. If the reform
projects were implemented, their impact on growth would be large enough to
slightly overcompensate the impact of the negative external shocks. The
poverty increase caused by the shocks would be more than offset for urban
households, but reinforced for rural households.
Keywords: Pro-poor Growth; CGE Analysis; Bolivia; (follow links to similar papers)
JEL-Codes: D58; O54; (follow links to similar papers)
34 pages, November 2004
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