Versión de HTML Básico
Carlos Gustavo Machicado y Paúl Estrada
Analíti a
k
4
Revista de Análisis Estadístico
Journal of Statistical Analysis
where only government expenditure increases, the nega-
tive sign on all sectoral outputs can be explained in relation
to reduced public investment, which affects public capital
and thus output in every sector.
The results show that the government should choose
a public investment policy over a public expenditure pol-
icy. This result itself points to another question: If edu-
cation and health are considered as elements of variable
g
, does this mean that it is bad for the government to in-
crease these expenditures? This question will be answered
in the following exercises. The results in Table 5 indicate
that a 25-percent increase in the consumption tax is needed
to completely compensate for the negative effects that a 10-
percent increase in government expenditures has on trans-
fers as a share of GDP. This huge increase negatively affects
growth, consumption, private investment and welfare. In
fact, only public investment reacts positively, with an in-
crease of 6.95 percent.
Variables
∆
g
∆
I
/
Y
g
∆
g
,
∆
I
/
Y
g
Simulated value
0.198
0.2756
0.198, 0.2936
c
m
−
4.36
1.31
−
0.41
c
n
−
2.92
1.80
2.52
Y
xh
−
2.95
3.68
8.22
Y
xa
−
0.61
0.76
1.66
Y
xm
−
0.79
0.95
2.09
Y
m
−
0.69
0.85
1.86
Y
n
−
2.92
1.80
2.52
p
n
−
2.06
−
0.41
−
3.17
Γ
/
GDP
−
51.55
1.49
−
45.02
i
−
2.38
1.37
1.76
I
−
4.12
5.19
11.69
C
−
3.56
1.58
1.21
Y
−
1.86
1.58
2.90
TU
−
3.38
1.51
1.33
Source: Author’s calculations
Table 4.
in steady-state values from an expenditure and investment policy (in percentages).
The second column presents the scenario where we
combine a 10-percent increase in government expenditures
with an increase in the value added tax (up to the Latin
American average) and a decrease in the hydrocarbons tax.
We find this to be a better policy, with all variables react-
ing positively. Of particular interest is that long run output
grows by 5.48 percent compared to the baseline scenario,
the best growth result observed for any simulation seen
yet. This important impact is surely driven by the 30.88-
percent increase in output in the hydrocarbons sector, the
main sector of the Bolivian economy.
4.1.3 Tax and expenditure policy
We can begin to answer the previous question by com-
bining the 10-percent increase in government expenditures
with an increase in the two main taxes that the Bolivian
government can change: the value added tax and the
hydrocarbons tax. In particular we aim to calculate the
change in tax rates required to compensate for the nega-
tive effect that government expenditures has on transfers
to households.
4.1.4 Fiscal policy together with improved efficiency
and productivity
In this subsection we analyze fiscal policy together with
two variables which are not directly related to fiscal policy
but which can be incentivized by the government. These
other two variables are efficiency, which pertains to im-
provements in the way public investment (in infrastruc-
ture) is provided, and productivity,
i.e
., improved total fac-
tor productivity across all sectors.
According to the 2006-2011National Development Plan
(the PND, in Spanish), Bolivia should have attained av-
erage annual output growth of 6.3 percent. This overall
growth was expected to come via annual growth of 3.1 per-
cent in agriculture, 6.8 percent for importables, 18.8 per-
68
Analítika,
Revista de análisis estadístico
, 2 (2012), Vol. 4(2): 57-79