Explaining Inequality and Poverty Reduction in Bolivia

IMF Working Papers, December 18, 2015

Source details

Investigation period: "the last 15 years".
Main driver of reduction in inequality and poverty: labor income growth at the bottom end of the income distribution.
Secondary contributors: increases in non-labor income (rents, transfers, remittances), though smaller in magnitude.
Notable program impact: introduction of Renta Dignidad "has made a big difference for the elderly poor."
Sectoral concentration of labor income gains: informal, low-skilled service and manufacturing sectors.
Risk to past gains: "As the gains from the commodity boom go into reverse, and the fiscal envelope becomes much tighter," preserving poverty and inequality reduction will require well designed and targeted labor and social policies.

Labor income growth concentrated among low-skilled, informal workers in services and manufacturing.
Non-labor income components considered: rents, transfers, remittances; these played a supportive but smaller role.
Targeted social program highlighted: Renta Dignidad and its significant effect on elderly poverty.

Imperative: design and target labor and social policies carefully to preserve the poverty and inequality reduction achieved over the last 15 years.
Policy urgency stems from two pressures:
- reversal of gains from the commodity boom;
- a much tighter fiscal envelope.