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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

Author

Listed:
  • Sergio G. Villarroel-Böhrt

    (Universidad Andina Simón Bolívar in La Paz, Bolivia)

Abstract

This paper explores Bolivia’s current unemployment situation taking into account the reallocation of resources within the aggregate supply. The origin of this internal imbalance is due to negative impacts of external real exchange rate (RER) shocks, as well as to changes in the destination of foreign direct investment (FDI) among different sectors of the economy. The model used to explain the imbalance is based on the Dependent Economy theoretical framework, in which production in a small open economy is disaggregated into tradable and non-tradable goods. Under this production scheme, any RER movement in terms of appreciation or depreciation produces a displacement of resources, either along the production possibilities frontier or through the unemployment zone. After demonstrating that the RER suffered an important appreciation in 1997, a model of the aggregate-supply function is constructed considering two variable outputs (tradable and non-tradable goods) and two variable inputs (capital and labor), suggesting in the end the existence of a slow restructuring process at the expense of unemployment of the labor force.

Suggested Citation

  • Sergio G. Villarroel-Böhrt, 2007. "Reallocation of Resources within the National Productive System in Bolivia: A View from the Perspective of Tradable and Non-Tradable Goods," Economía Mexicana NUEVA ÉPOCA, CIDE, División de Economía, vol. 0(1), pages 105-149, January-J.
    • Handle: RePEc:emc:ecomex:v:16:y:2007:i:1:p:105-149
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    References listed on IDEAS

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    1. Hofman, André A. & Tapia, Heriberto, 2003. "Potential output in Latin America: a standard approach for the 1950-2002 period," Estudios Estadísticos 4721, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    2. Corden, W Max, 1989. "Macroeconomic Adjustment in Developing Countries," The World Bank Research Observer, World Bank, vol. 4(1), pages 51-64, January.
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    More about this item

    Keywords

    Inter-sector labor mobility; Internal balance; Tradable-Nontradable (TNT) model;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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