Reallocation of resources within the national productive system in Bolivia

A view from the perspective of tradable and non-tradable goods

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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.
Original languageEnglish
Pages (from-to)105-149
Number of pages45
JournalEconomía Mexicana Nueva Época
VolumeXVI
Issue number1
Publication statusPublished - 2007
Externally publishedYes

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Unemployment
Resources
Bolivia
Reallocation
Real exchange rate
Imbalance
Theoretical framework
Aggregate supply
Expenses
Labor force
Foreign direct investment
Labor

Keywords

  • Inter-sector labor mobility
  • Internal balance
  • Tradable-Nontradable (TNT) model

Cite this

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title = "Reallocation of resources within the national productive system in Bolivia: A view from the perspective of tradable and non-tradable goods",
abstract = "This paper explores Bolivia’s current unemployment situationtaking into account the reallocation of resources within the aggregatesupply. The origin of this internal imbalance is due to negative impacts ofexternal real exchange rate (RER) shocks, as well as to changes in thedestination of foreign direct investment (FDI) among different sectors ofthe economy.The model used to explain the imbalance is based on the DependentEconomy theoretical framework, in which production in a small openeconomy is disaggregated into tradable and non-tradable goods. Underthis production scheme, any RER movement in terms of appreciation ordepreciation produces a displacement of resources, either along the productionpossibilities frontier or through the unemployment zone.After demonstrating that the RER suffered an important appreciationin 1997, a model of the aggregate-supply function is constructed consideringtwo variable outputs (tradable and non-tradable goods) and two variableinputs (capital and labor), suggesting in the end the existence of a slowrestructuring process at the expense of unemployment of the labor force.",
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AB - This paper explores Bolivia’s current unemployment situationtaking into account the reallocation of resources within the aggregatesupply. The origin of this internal imbalance is due to negative impacts ofexternal real exchange rate (RER) shocks, as well as to changes in thedestination of foreign direct investment (FDI) among different sectors ofthe economy.The model used to explain the imbalance is based on the DependentEconomy theoretical framework, in which production in a small openeconomy is disaggregated into tradable and non-tradable goods. Underthis production scheme, any RER movement in terms of appreciation ordepreciation produces a displacement of resources, either along the productionpossibilities frontier or through the unemployment zone.After demonstrating that the RER suffered an important appreciationin 1997, a model of the aggregate-supply function is constructed consideringtwo variable outputs (tradable and non-tradable goods) and two variableinputs (capital and labor), suggesting in the end the existence of a slowrestructuring process at the expense of unemployment of the labor force.

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KW - Internal balance

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