Institutions, Growth and Poverty in Bolivia Obstacles to Broad-based Growth.

Abstract

Bolivian economic growth, investment and productivity levels have lagged behind Latin American averages for fifty years. Explanations of poor performance have included geographic constraints, institutional barriers, political instability and political economy factors, among others. In a low-growth, low-investment and low-productivity economy, however, a group of non-traditional exports experienced outstanding growth between 1980 and 2005. In recent years, 160 of a total 487 Bolivian export products at the 4-digit SITC category, gained world market share, and 23 were consistent 'champions'. Why do some export products, which share the same obstacles to growth as hundreds of other products e.g. high transportation costs, high institutional barriers, low human capital, and so on, perform well? In this paper we describe 'pockets of growth' in the Bolivian economy, and analyse three cases of outstanding performance in the non-traditional export sector. We find that quality-sensitive, price-sensitive and commodity exports have each a different set of 'binding constraints' that involve idiosyncratic ways of overcoming barriers to growth. The paper concludes with a brief discussion of policy and analytical implications of looking at 'pockets of growth' in a low-growth, low-investment and low-productivity economy.

Citation

IPPG Discussion Paper Series Number Nine, DFID, London, UK, 27 pp.

Institutions, Growth and Poverty in Bolivia Obstacles to Broad-based Growth.

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