Versión de HTML Básico
Carlos Gustavo Machicado y Paúl Estrada
Analíti a
k
4
Revista de Análisis Estadístico
Journal of Statistical Analysis
is an appropriate growth rate for a country that needs to
reduce its level of poverty. Private and public investment
also benefit substantially, respectively by 7.25 percent and
9.42 percent. Welfare also rises by 8.97 percent, which is
primary explained by the 12.67-percent increase in con-
sumption of non-tradable goods.
Important and sizable effects can be seen when the in-
crease in TFP is omitted, although the effects are smaller.
Total real output increases by 8.05 percent, welfare gains
are in the order of 7.23 percent and total real consumption
rises by 7.81 percent. Lump sum transfers remain constant
because the effectiveness index increased by 17.7 percent.
Variables
∆
TFP
∆
θ
∆
g
,
∆
T FP
∆
g
,
∆
TFP
and
∆
θ
∆
g
,
∆
TFP
and
∆
θ
∆
g
,
∆
θ
∆
g
,
∆
I
/
Y
g
and
∆
θ
Simulated value
(*)
0.644
0.198, (*)
0.198, (*) and
0.644
0.198, (*) and
0.69
0.198, 0.721
0.198, 0.2936
and 0.7
c
m
3.29
3.04
−
1.06
2.08
6.76
6.33
9.54
c
n
6.67
3.40
3.67
7.29
12.67
9.00
13.70
Y
xh
4.75
6.35
1.76
8.31
18.38
19.72
30.50
Y
xa
1.27
1.29
0.68
1.98
3.88
3.81
5.69
Y
xm
3.10
1.61
2.32
4.01
6.45
4.82
7.21
Y
m
2.04
1.46
1.36
2.85
5.00
4.29
6.43
Y
n
6.67
3.40
3.67
7.29
12.67
9.00
13.70
p
n
−
2.89
−
0.20
−
4.82
−
4.96
−
5.15
−
2.49
−
3.51
Γ
/
GDP
13.06
13.80
−
36.61
−
21.42
0.00
0.00
0.00
i
2.90
2.63
0.52
3.22
7.25
6.82
10.42
I
3.70
3.80
−
0.42
3.50
9.42
9.32
25.75
C
5.16
3.24
1.56
4.96
10.03
7.81
11.84
Y
4.23
2.83
2.34
5.30
9.71
8.05
12.27
TU
4.72l
3.06
1.60
4.70
8.97
7.23
10.46
Source: Author’s calculations
Note: (*) The percentage increases are 0.6 (tradables), 4.3 (non-tradables), 0.71 (hydrocarbons), 1.8 (mining) and 0.6 (agriculture).
Table 6.
Steady-state changes: fiscalpolicy with improved effectiveness and TFP.
Unfortunately, there is no available metric to determine
whether this magnitude is relatively big or small. Rioja
(2003) calculates
θ
as equal to 0.74, the average across seven
Latin American countries. Taking this value as a bench-
mark, we can say that the country will be able to develop
a fiscal policy using public expenditures without affecting
either growth or its social policy if it can approximate this
number. This is a new finding because it shows links be-
tween effectiveness in the provision of public infrastruc-
ture, public expenditures (health and education) and social
policy (transfers to households).
In the last column, we simulate a 10-percent increase in
public investment as a share of government revenues. This
reduces the required increase in effectiveness and is the
best case scenario for Bolivia. All the main macroeconomic
variables jump by more than 10 percent. Public investment
is notable in this regard, with arise of 25.75 percent. This re-
sult shows the importance of public investment, along with
the associated measure of effectiveness as emphasized by
Rioja (2003).
Latin American countries which have experienced an
increase in TFP are those which have been able to reduce
their growth gap with developed countries such as the US
or UK. Our model demonstrates that this reduction in the
growth gap could also happen for Bolivia if the country
begins to dismantle the various restrictions and distortions
that impede improved productivity. Long run economic
growth can be improved by enhancing TFP growth. In Bo-
livia, however, there is also plenty of scope for public in-
frastructure and spending policies, particularly if they are
accompanied by a healthy measure of effectiveness. This
combination of more, and more effective, spending will
certainly help poverty reduction and sectoral economic
growth, and will thus also help solve other problems like
unemployment and underused capacity.
21
21
See Restuccia (2008) for an excellent explanation of how low output per worker in Latin America is due to a low and declining relative TFP.
70
Analítika,
Revista de análisis estadístico
, 2 (2012), Vol. 4(2): 57-79