Macroeconomics

By: Lykke E. Andersen*

According to The World Bank’s World Development Indicators, there are now more or less an equal number of boys and girls enrolled in primary and secondary school around the World. The worldwide Gender Parity Index has been going up steadily over the last several decades, reaching 99 girls for every 100 boys in 2014, and at this rate of change we would have reached parity last year. This is due to dramatic improvements in girls’ enrolment in Africa and Asia. In Latin America and the Caribbean, in contrast, there have been more girls enrolled than boys already since the early 1980s (see Figure 1).

Read More »

By: Luis Carlos Jemio Ph.D.

Historically, Bolivia’s economic growth patterns have depended on export commodity sectors, namely minerals and hydrocarbons, which booms and collapses have determined the behavior of the economy as a whole. Past economic growth patterns have resulted in distorted economic structures, and did not promote better labor market results. In particular,  employment remains heavily concentrated in low-productivity activities, mostly in non-tradable sectors, with high poverty incidence, such as traditional agriculture and urban informal sectors.  The historical patterns of Bolivia’s economic growth have also produced large labor productivity gaps among different sectors of the economy, and within them. In Figure 1, sectors are grouped based on their labor intensity, differentiating them between labor intensive and non-labor intensive sectors.

Figure 1 shows that in 2014, 49.4% of GDP was concentrated in labor-intensive activities, while 50.6% in non labor-intensive activities. Employment, on the other hand, was largely concentrated on labor-intensive activities, which comprised 81.4% of total employment, while non labor-intensive activities only comprised 18.6% of the occupied population.  These GDP and labor structures imply large productivity gaps between the two sector groups, being the average productivity in non labor-intensive sectors 4.5 times larger than that in labor intensive sectors. The productivity gap in turn brought about labor income disparities, with workers employed in non labor-intensive activities earning 2.5 more than those in labor-intensive sectors.

The observed growth patterns of the Bolivian economy, and the economic and employment structures resulting thereafter, have been the outcome of policies implemented in the past. Independent of the ideological orientation of successive governments, policies invariably focussed on promoting growth in non labor-intensive commodity-exporting activities, such as mining and hydrocarbons. For instance, due to the various reforms implemented during the 1990s, FDI flows to those sectors in the 1999-2014 period, almost tripled FDI flows received by labor-intensive sectors.

The productivity and income gaps existing among activity sectors, resulting from Bolivia’s historic growth patterns, overlap with poverty incidence existing among workers of these two group categories. Figure 2 shows that poverty incidence of workers in labor-intensive sectors is 39.4%, while that for workers in non labor-intensive sectors is only is 15.5%.

Existing productivity and income gaps between these two sector groups are linked to various socio-economic dimensions that characterize the Bolivian labor force, including workers’ informality condition, educational level, gender, ethnicity, geographic location among the most important.

For instance, there are large educational differentials between workers in the two sector groups. In labor-intensive sectors the share of non-skilled workers in total employment is 62.4%, while this share is only 39% in non labor-intensive sectors. The later highlights the importance of education as a means to increase labor productivity and labor earnings and thus reduce poverty incidence.

Existing gaps are also linked to the prevalence of informality among workers belonging to the two sector groups. According to Figure 2, in 2004 77.3% of workers in non labor-intensive sectors were employed in informal activities, while 45.8% of workers employed in non labor-intensive sectors were informal. Informality is measured considering workers in firms with up to four workers (excluding professionals). In this regard, informality can explain productivity and income gaps between and within any particular activity sector. In many sectors, mostly labor-intensive ones, there are formal and informal activities coexisting, with former exhibiting larger productivity and income levels than the later.

Furthermore, the shares of vulnerable groups, such as women and indigenous people, among workers in the two sector groups show that vulnerable groups are mostly employed in labor-intensive sectors, where productivity and incomes are lower, and poverty incidence and informality are higher. The share of women employed in labor-intensive sectors is 44.9%, while this percentage is as low as 25% in non-labor intensive activities.  Likewise, share of indigenous people employed in labor-intensive sectors is 42.5%, while this percentage is only 20.7% for non labor-intensive activities.

From the above analysis, it is clear that Bolivia requires a change in its economic growth pattern to one, which would promote growth based on labor-intensive activities, but with higher productivity, probably in tradable sectors, such as the manufacturing sector. In 2014, manufacturing activities comprised 17.5% of GDP and only 9.3% of employment, being its labor productivity on average more than three times greater than that in other labor-intensive activities.

The development strategy and policies necessaries to promote the required change, at the macro, sectoral and micro levels, need to be carefully designed and implemented. They have to cover a wide range of areas. Appropriate policies  should cover: i) macroeconomic policies, including tax, exchange rate and monetary policies aimed at maintaining macroeconomic stability and promoting competitiveness; ii) trade policies and integration to the global economy; iii) FDI promotion policies to strategic sectors of the economy; iv) sectoral allocation of public investment, mainly to infrastructure and public services; v) setting-up strong and stable institutions to guarantee contract enforcement and the rule of law; vi) improving the overall business climate; vi) and investing in human capital through improving the access to and quality of education and health services.

By: Lykke E. Andersen*

Two of the Sustainable Development Goals recently agreed by all the member states of United Nations are to reduce poverty and to reduce inequality, and for those goals to be realized, the incomes of the poorest 40% of the population have to increase. Designing policies to reduce poverty and inequality at the very least requires us to know where to find the target population. In this blog I will argue that they are probably not where you think they would be. Read More »

By: Lykke E. Andersen*

“The future is already here, it’s just not evenly distributed”
William Gibson

The scale of inequality in this world is almost unfathomable. In 2013, the average inhabitant of Denmark, Norway, Sweden and Qatar earned more in one day than what the average inhabitant of Malawi and Burundi earned during an entire year^[1]. Apart from the staggering between-country inequality, there is also vast and increasing inequality within countries. According to United Nations, on average—and taking into account population size—income inequality increased by 11 per cent in developing countries between 1990 and 2010[2]. Currently, about 60% of the variation in incomes across the globe is explained by country citizenship alone, while another 20% is explained by parental income class[3]. This means that at least 80% of the variation in incomes are determined already by birth, leaving less than 20% to be determined by own effort, ingenuity, planning, determination, risk-taking and passion. Thus, the world is not just a place of huge inequality of outcomes, but also of huge inequality of opportunity. Read More »

By Susana del Granado* and Gabriela Olivarez**

Questions surrounding the extraction of natural resources have been the topic of multiple debates in Bolivia. Most recently, two talks, one in La Paz[1] and the other in Santa Cruz[2], questioned the need of this extraction and analyzed the costs. However, the need to compare the extraction between the current and previous governments remains. This short article attempts to contribute to fulfill this gap by comparing the quantities extracted and the public investment between a government claiming to be state-led (2004-2013) and neoliberal ones (1985-2003).

The data shows that the quantities extracted of the main raw materials for export in Bolivia’s economy have increased in the state-led government (see figure 1), but public investment in industry and manufacturing has remained fairly constant (figure 2). Yet, the current government wishes – as established in both development plans (2007, 2015) – to transform Bolivia’s extractivist economy into an economy in which the extraction of raw materials is used as a springboard to achieve industrialization. Nevertheless, little progress appears to be taking place in the discursive trajectory of the current government led by Evo Morales. Furthermore Raul Zibechi, an Uruguayan researcher and journalist, in a recent talk in La Paz argued that industrialization from extractivism is an unattainable goal[3]. Read More »

By: Lykke E. Andersen & Fabián Soria*

According to the latest Bolivian Population Census (2012), only 9.6% of households have Internet access (either fixed or wireless). Considering that the Bolivian Constitution puts telecommunications (including Internet) on par with water, sanitation and electricity as a basic human right, this coverage is outrageously low.

The main reason for the low coverage is the high cost. Even after nationalizing the telecommunications sector (2008) and investing USD 300 million in our very own telecommunications satellite, Tupac Katari (2013), Internet services in Bolivia remain patchy, expensive and slow compared to other countries in the region. For most Bolivians, having Internet at home is simply unaffordable.

Figure 1 shows that, for an average person in Bolivia, one hour of work would buy less than 1 day of a lousy 1Mbps (Megabits per second) Internet connection, whereas the average person in “developed countries,” such as the Netherlands, South Korea, Denmark, and China could buy several years worth of such a service for just one hour of work.

Figure 1: Internet Purchasing Power (days of 1Mbps Internet service that can be bought for one hour of work), as well as average download speed and average cost per Mbps.

Read More »

By Cecilia Juambeltz*

In the field of international cooperation, particularly in development cooperation, much is said of High, Middle and Low Income Countries. This characterization may only seem as a way of ordering these countries. But in practice it has important consequences, as it defines the type of aid these countries receive. Donor countries base on these categories to define their aid strategies.

Read More »

Despite the progress the world has made towards eliminating extreme poverty, one in five people on the planet are still unable to provide for their most basic needs. A report by the High Level Panel—a 27 member group advising the United Nations on a global development framework beyond the target date for the Millennium Development Goals (MDGs)—on the post-2015 development addresses this unacceptable statistic by placing the eradication of poverty on the global agenda.  The question that begs answering: ‘What and whose poverty?’

Pause for a moment and picture Aisha: She is a young widow who lives in rural northern Nigeria.  She has five children, but cannot afford to send them to school. They live in a thatch-roofed wooden hut, and the closest source of potable water is 50 km away. Aisha earns an average of $2 a day. Would you describe Aisha as poor and why is this important? On the national and global scale, two reasons immediately come to mind. The adopted measure of poverty will guide who is targeted with scarce development resources and how we assess meeting national and global poverty goals. In addition, measures can be powerful drivers of change along the direction of whatever is assessed. Read More »

The United Nations Millennium Development Goals (MDGs) set to reduce by half the number of people without access to clean water by 2015 as target ten of goal number seven: ensure environmental sustainability. And—although this fact remains controversial*—this target was met three years early in March 2012. However, this is not a cause for complacency since, according to the 2012 report by the Joint Monitoring Program—the body that carries out MDGs target assessments—780 million people are still at the back of the queue for access to clean water. In the future, improving access to water for the remaining three quarters of a million people without it will need to become a bigger, more crosscutting priority because it has much more to offer than environmental sustainability. Read More »

By Ricardo Morel Berendson

The mining boom in Peru during the 1990s attracted private investment that led to current economic growth. However, this did not translate into sustainable development of the mining activities. The government has been absent in remote mining areas and, thus, corporations have been targeted as being responsible for attending to local communities’ demands and providing assistance. As a result, mining companies developed only short-term and interest-driven ‘socially responsible’ plans to continue operating. Not surprisingly, social conflict has been especially prevalent in the field of extractive industries. A shift from an extractive model to a more inclusive, participatory one—where governments and private companies work together with local communities—could create a virtuous circle of sustainable social development.

Read More »