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.
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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number
1231.
Find related papers by JEL classification: D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models O54 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
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