Economic Growth Projects

Economic growth is what all countries strive for. This series of projects therefore aims to analyse a number of factors which limit or contribute to economic growth in Bolivia. ________________________________________________________________________________________________


1) Productivity in Bolivia, Firm-Level Estimations and two Illustrative Case Studies

Aim: This proposal aims to analyze productivity levels, dispersion and growth in Bolivia. Firm-level data will be used for the years 1988-2001 for the whole country. It is going to be the first time in Bolivia that a study of productivity will be done using firm-level data. In addition we propose to undertake two case studies. The first and most important one will address the current productivity levels and dispersion in the quinoa grain process. In recent years, the quinoa sector experienced a significant growth driven by an unprecedented increase in the global quinoa demand and a revolutionary technological change which has affected the productivity indicators of these firms. The second case study will compare productivity levels among formal and informal firms in the leather industry. This study will analyze the tanning and leather manufacturing sub-sectors highlighting the factors that have prevented a productivity development.

Project director: Carlos Gustavo Machicado Salas

Other participants: Juan Cristobal Birbuet (Centre for the Promotion of Sustainable Technologies, CPTS).

Funding/collaboration: IADB Research Network



2) Analysis of the factors which limit growth and development in Bolivia, and an evaluation of alternative policies that would contribute to overcoming these limitations at a regional and national level.

Aim: the current research proposal is intended to make a detailed and rigorous analysis of the factors which have limited Bolivia´s growth and development in the long term and in particular over the last 20 years (1989-2009). The low rates of growth observed over time have resulted in low income levels, a high prevalence of extreme poverty and insufficient employment generation. From 1985 until 2005 the country applied a market based development model, which has been extremely successful in stabalising the economy. However achievements in terms of accelerated growth have been more limited.

In the decade of 2000 the free market model was substituted for a model in which the state plays a leading role. Under this model a number of previously applied structural reforms have been reverted. Nevertheless, growth to date has remained at levels insufficient to achieve growth that will enable the country to develop and eliminate extreme poverty.

In this research we propose to study in detail the factors that limit the country’s growth at both a macroeconomic and regional level (departmental and urban/rural). From this analysis we try to identify the limiting factors on growth, with the objective of proposing alternative policies and strategies that would enable the country to overcome the structural factors hindering growth.

Project director: Carlos Gustavo Machicado Salas

Other participants: Osvaldo Nina and Luis Carlos Jemio.

Funding/collaboration: PIEB Foundation

Project status: Finished.

3) Public Expenditure Policy in Bolivia, Growth and Welfare

Aim: It has been widely documented that public expenditure is important for economic growth, but little work has been done in relation to which type of expenditure could be more growth and welfare enhancing. This proposal aims to develop a Dynamic Stochastic General Equilibrium (DSGE) model to study the effects of public education, health and infrastructure investment, on growth and welfare, among other macroeconomic variables such as consumption and private investment. The model will be parameterized and solved for the Bolivian economy. Currently, the government is retrieving fiscal policy as its main tool to attack poverty and aims to put government expenditure and investment as the foremost instruments to promote growth and welfare. The second-order approximation technique will be used to solve the model. The benefit of using this technique is that it allows for consideration of second-order effects (uncertainty) and in particular it allows for measurement of welfare and growth effects more precisely.

Project director: Carlos Gustavo Machicado Salas

Other participants: Paul Estrada and Ximena Flores.

Funding/collaboration: Poverty and Economic Policy (PEP) Network


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