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Natural Gas and Inequality in Bolivia after Nationalization.
Lykke E. Andersen, Johann Caro, Robert Faris & Mauricio Medinaceli
July 2006
The high oil
prices and the sharp increases in royalties mean that the natural gas
boom in Bolivia has become very important for the economy. This paper
uses a Computable General Equilibrium (CGE) model to assess the impacts
of this boom on key macroeconomic variables as well as the distribution
of incomes in the society. From a macroeconomic perspective, the natural
gas boom is a blessing, adding around 1 percentage point to GDP growth
rates for at least a decade, and sharply increasing government revenues
available for public spending and investment. However, the poorest
segments of the population (rural small-holders and urban informals)
suffer actual reductions in their real incomes, compared to the
counterfactual scenario without the gas boom. This means that the
natural gas boom not only causes an increase in inequality but also an
increase in poverty. The paper finishes with some policy recommendations
on how to counteract the negative side effects of the natural gas boom.
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