Call edition 2012

A new edition of the Prize of the Belgian Development Cooperation has been launched. This call is open until March 31st, 2011. You can read in the regulations whether you comply with the criteria for participation.

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The restrictions to development imposed by its own underdevelopment

Natacha MORALES student laureate

°1975 Bolivia
Licence in economics, Universidad Católica Boliviana, La Paz, Bolivia, 1999

Las restricciones al desarrollo impuestas por el propio subdesarrollo

This thesis explores the complex relationships between economic growth, income distribution and unequal access to public services in Bolivia. It deals with the historically skewed income distribution and even more with the increase of inequality in recent years of structural adjustment. The study analyses the causes and the consequences of this persisting inequality. In this endeavour, it uses a wealth of regional data and combines them in an intelligent way with insights from various theoretical models of growth and inequality. The core of the analysis is a simple econometric model that describes the links between income inequality, production per capita and variables related to human capital formation.

One of the interesting results of the model is the estimation of a Kuznets-curve, describing the relation between wage income inequality and aggregate production levels over the Bolivian provinces. The study locates the turning point of the inverted-U curve of the Kuznets-hypotesis, i.e. where increasing growth starts to reduce inequality, at an income of US$ 1850 per capita. This is well above the present-day average per capita income level of around US$ 1000. The result suggests that in the absence of a policy change, the expected 'trickle down' effect will fail to be produced quickly. Inequality will even tend to increase further. As in Kuznets' original explanation, the author shows that this increasing inequality is directly related to migration from poor, but egalitarian rural areas to rich, but inegalitarian urban areas.

The most development-relevant part of the study is a further analysis of policy alternatives for different provinces, grouped according to their position on the estimated Kuznets-curve. This generates a number of tentative regional policy prescriptions. Crucial in all regions turn out to be investments in human capital. Especially educational investments in women have a potential to reduce inequality and increase economic growth in the poorer regions. The study also indicates that there might be a potential for income convergence between regions in Bolivia, i.e. the poorer regions of Bolivia seem to have a capacity to grow faster with similar additional investments than the more developed regions.

report by Prof. Dr. Johan Bastiaensen, Institute of Development Policy and Management, Universiteit Antwerpen, Belgium