INESAD
ABSTRACT:
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, and particularly important as a source of government revenues. Using a CGE model, Andersen et al (2006) show that the natural gas boom is likely to boost GDP growth by about 1 percentage point per year. However, if the government continues with past spending and investment patterns, the boom is also likely to have a very adverse effect on the income distribution, so much so that the poorest half of the population is likely to experience absolute reductions in their real income levels compared to a scenario without gas boom. The present paper explores alternative uses of natural gas revenues in the CGE model to see if a better outcome can be engineered.
