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There is arguably nothing worse for long run growth prospects in
an economy than low social mobility. Without the possibility of
advancing upwards in society, poor people have little incentive
to work hard and invest in human and physical capital.
Conversely, without investment and hard work, there is little
chance of improving. Thus, the poverty trap.
Maybe the only thing worse than low social mobility, is low
social mobility AND high inequality. This situation reflects a
country with a large gap between the rich and the poor, and
little chance of ever crossing that gap – a situation which by
any standards must be considered unfair. Outcomes are mostly
determined from birth, by factors entirely outside the control
of each individual, whereas subsequent effort and investments
make little difference.
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Bolivia has until now been a classic example of low social
mobility and high inequality, a fact that may help explain why
labor productivity and wages have not improved in real terms
over the last 50 years.
Fortunately, mobility in
Bolivia finally seems to be improving. Even better, the forces
of change seem to come from within the society rather than being
imposed from the outside. This means that Bolivia may now stand
at an important turning point in history, ready to take
advantage of better education and better incentives. Let's just
hope that the
Natural Gas Curse doesn't ruin the development prospects.
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