Natural Gas and Inequality in Bolivia after Nationalization

Lykke E. Andersen (), Johann Caro Burnett (), Robert Faris () and Mauricio Medinaceli ()
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Robert Faris: Kennedy School of Government, Harvard University

No 05/2006, Development Research Working Paper Series from Institute for Advanced Development Studies

Abstract: The high oil prices and the sharp increases in royalties mean that the natural gas boom in Bolivia has become very important for the economy. This paper uses a Computable General Equilibrium (CGE) model to assess the impacts of this boom on key macroeconomic variables as well as the distribution of incomes in the society. From a macroeconomic perspective, the natural gas boom is a blessing, adding around 1 percentage point to GDP growth rates for at least a decade, and sharply increasing government revenues available for public spending and investment. However, the poorest segments of the population (rural small-holders and urban informals) suffer actual reductions in their real incomes, compared to the counterfactual scenario without the gas boom. This means that the natural gas boom not only causes an increase in inequality but also an increase in poverty. The paper finishes with some policy recommendations on how to counteract the negative side effects of the natural gas boom.

Keywords: Natural Gas; Inequality; CGE model; Bolivia (search for similar items in EconPapers)
JEL-codes: Q33 Q43 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cmp and nep-ene
Date: 2006-07
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