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Bolivia Poverty Assessment: Establishing the Basis for Pro-Poor Growth

Bolivia faces high levels of persistent poverty and inequality. In 2002, 65 percent of the population was living in poverty and, of that, nearly 40 percent in extreme poverty. There was a decline in poverty in the mid-1990s, however, the rate today remains close to the level of the early 1990s. In addition, income distribution in Bolivia is among the most unequal in Latin America. This report suggests three main reasons for the continuing high levels of poverty and inequality:

First growth during the 1990s was concentrated in natural resource-based exports, which have a relatively low demand for labor services.

Second, the low productivity of firms, particularly in the informal labor-intensive sector, has held back the growth of both employment and wages. This has resulted from burdensome business and labor market regulations that discourage innovation and smaller companies from participating fully in the formal economy, scaling up and improving productivity.

Third, the poor have inadequate opportunities to improve their human capital (e.g., through quality education, particularly secondary and above), despite recent progress in access to basic education. This results in low labor productivity and restricted access to better-paying jobs.

The main overall policy lesson is that broad-based economic growth, sustained over the long term, is a fundamental and necessary condition to reduce poverty and inequality. However, this needs to be supported by policies to improve labor productivity and job creation. 

The report

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