Policy

By: Lykke E. Andersen*

According to Nina and Arduz (2016), the density of roads in Bolivia is about 8 km per 100 km² of territory, which is less than half the average density in Latin America and less than a third of the world average of 28 km/100 km². By 2012, about 52% of the primary road network was paved, while a very small fraction of other roads was paved. The lack of good roads constitutes a serious limitation on the development of the country, as it dramatically increases transportation time and vehicle maintenance costs, and therefore transport costs (1).

This situation is pretty much inevitable for a large, sparsely populated, mountainous, jungle covered country, like Bolivia, but the Government of Bolivia has been doing its best to improve the situation by channelling enormous amounts of money into road construction (around USD 10 billion during the last 10 years), making the transport sector by far the single biggest recipient of public funds. For example, last year the Bolivian Government budgeted 28.9% of all public investment to the transport sector (28.9% of USD 6.4 billion amounts to USD 1.8 billion), while the education and health sectors received 5.5% each, and the water infrastructure sector only 0.9% (2).

The problem is that almost all of these road investments have been unbelievably badly executed.

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By: Lykke E. Andersen*

Last month I participated in a very interesting workshop on water and sanitation in rural Bolivia organized by the Ministry of Environment and Water. I learned from the engineers and sociologists there that things are never as simple as economists tend to think. But as the only economist present, I also tried to teach the engineers and sociologists that things are not as simple as they tend to think.

With the combined insights from engineers, sociologists and economists, I have reached the conclusion that 100% coverage is an elusive target for at least five different reasons:

First, the population growth rate in Bolivia is about 1.5% per year, which means that even if we reach 100% coverage by January 2025, by December the same year there will be almost 200,000 additional people who need water and sanitation.

Second, the population is not only constantly growing, but also constantly moving. More than half of all Bolivian municipalities are losing population due to internal migration (see Map 1 below), while a few dozen municipalities are receiving the vast majority of these migrants. The main receiving municipalities are: Santa Cruz de la Sierra (32,000 migrants per year), El Elto (20,000), Cochabamba (11,000), La Guardia (6,000), Warnes (6,000), Oruro (6,000), Sacaba (6,000), and Tarija (5,000) (1). Close to a million Bolivians will have moved from one municipality to another between now and 2025, and most of them will likely come from the disperse rural communities that the government is currently prioritizing for water and sanitation investments. The most extreme example in the map below is the municipality of Chayanta in the northern part of Potosí. In the five years before the 2012 population census, it lost 29% of its population to migration, despite having just reached 94% coverage of water.

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By: Lykke E. Andersen*

Stories about sexual violence against girls and women are common in the Bolivian news, but recently the stories have escalated to such hideous levels that the Vice-President of Bolivia has announced a referendum on whether to re-institute life-in-prison and death penalty in Bolivia (1).

For example, last Sunday, one of the guards of the “Defence of Children and Adolescents” facility in La Paz was caught in fraganti sexually violation two under-age girls who had come to the facility because they had suffered abuse (1).

The day before, a step-father and step-grandfather were jailed in Cochabamba for sexually violating and killing a baby girl, who had not even turned two (2).

A couple of weeks before, the President of the Municipal Council of Tapacarí (Cochabamba) was physically and sexually assaulting one of the female members of the Council, and a friend of the woman was trying to stop the assault when the Mayor arrived. But instead of helping the two women, the Mayor exclaimed “Why haven’t you raped these horny whores yet? Rape them and throw them in the river.” (3)

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By: Lykke E. Andersen*

At INESAD there is no gender discrimination in salaries. But there ought to be. As I will show in this blog, women at INESAD are on average about four times more productive than men.

Admittedly, it is a small sample. We are currently only six senior researchers at INESAD: Two females and four males (we recently lost one female to Panama). Junior researchers come and go, and for administrative and support staff it is difficult to measure productivity, so in this blog I will focus on the productivity of the six current senior researchers who were all salaried staff at INESAD during the last three calendar years (2014-2016). All of them have a Ph.D. in Economics from a foreign university many years ago (except one, who didn’t bother to finish and defend his Ph.D.-thesis, because he (correctly) perceived that it would not add to his earnings potential).

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By: Lykke E. Andersen*

In 2013, Bolivia passed Law No. 348 titled “The Integral Law to Guarantee Women a Life Without Violence” in order to address the high levels of physical and sexual violence against women, and the unacceptably high levels of femicide (basically defined as a woman being killed by someone she knows).

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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).

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By: Lykke E. Andersen*

Poverty is usually measured at the household level, and since there is pretty much the same number of women as men in each household, poverty rates have almost by definition been identical for men and women. This fact, however, has not prevented thousands of articles from claiming that “poverty has a female face” (1). The perception that women are more likely to be poor is almost universal, despite the lack of empirical evidence.

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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

I usually don’t write about politics because I worry more about the long-run, structural obstacles to development, instead of bothering about short-term wriggles, which tend to work themselves out quickly. However, I do worry that the upcoming US election might affect the long-run direction of development not only in the United States, but in the entire World. In addition, the whole thing has turned so bizarre that I am beginning to believe in parallel universes, and I fear that a wormhole has opened up, which will make people from these two separate universes vote in the same election, with very unpredictable results.

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By: Lykke E. Andersen

Creating equality of opportunity is one of the most important roles of the government in any country. It is about leveling the playing field, so that children born into disadvantaged families (through no fault of their own, obviously) will not automatically become disadvantaged themselves and will not automatically transmit these disadvantages to their own children. It is about breaking the vicious cycle and intergenerational transmission of poverty.

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