Reallocation of resources within the national productive system in Bolivia: a view from the perspective of tradable and non-tradable goods.

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Reallocation of resources within the national productive system in Bolivia: a view from the perspective of tradable and non-tradable goods.

Introduction

Unemployment has become a severe macroeconomic problem in Bolivia, with main urban-area rates more than doubling in the last 8 years. While other macroeconomic indicators have begun to stabilize, unemployment remains, forcing researchers to find new and innovative explanations that could eventually lead to a better understanding of the problem.

Factors contributing to the internal imbalance derived from external and domestic sources, obliging the Bolivian governments to adopt several measures to contain the negative effects of these shocks.

However, all adopted policies were mainly oriented toward reducing impacts on the aggregate demand, employing several analytical tools that do not consider important aspects of resources reallocation within the national productive system.

This article deals with the imbalance problem from the aggregate-supply perspective, assimilating macroeconomic techniques of small open economies. The document is divided into four sections. The first comprises this introduction, in which the economy is briefly evaluated, highlighting the relationships between unemployment and inflation. In section I, a conceptual framework that contemplates the production structure concerning tradable and non-tradable goods is developed, while section II presents the estimation of certain national productive-system parameters and shows the transit of the economy through the unemployment zone. The paper's last section closes the work with concluding remarks.

Brief Description of the Economy

The period analyzed covers the years 1996-2002. The first year, 1996, was selected due to the profound structural change represented by the capitalization (the Bolivian version of privatization) that began in 1995. After this reform the role of the state was redefined, focusing on regulatory activities and moving away from production processes.

Transfer of the principal state-owned enterprises, to the foreign private sector in particular, attracted important investment that allowed the economy to grow at rates of 5% per year. Unfortunately, different internal and external shocks rendered it impossible to take advantage of this sudden economic emergence. Nonetheless, it is necessary to carry out an integral analysis of the multiple causes that influenced Bolivia's economic performance in order to implement (in the short term) policy responses that may reduce the negative impacts of future shocks. Table 1 shows certain key macroeconomic indicators during the 1996-2002 period.

The behavior of the economy demonstrates some clear patterns, such as the permanent reduction in the inflation rate (following the guidelines suggested by multilateral donors to maintain macroeconomic stability).

On the other hand, the urban open unemployment rate (1) exhibits a rising tendency that doubled its value during the study period.

Regarding other variables, the economy's behavior can clearly be divided into two stages with the following characteristics:

* 1996-1998. During this period, the economy showed a persistent growth in the GDP (approximately 5% on average), due in partic...

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