1

Public Expenditure Policy in Bolivia, Growth and

Welfare

RESEARCH PROPOSAL

Presented to

PEP Network

By

Carlos Gustavo Machicado S.♣

Paul Estrada♠ and

Ximena Flores♦

BOLIVIA

November, 2008 Abstract It has been widely documented that public expenditure is important for economic growth, but little work has been done in relation to which type of expenditure could be more growth and welfare enhancing. This proposal aims to develop a Dynamic Stochastic General Equilibrium (DSGE) model to study the effects of public education, health and infrastructure investment, on growth and welfare, among other macroeconomic variables such as consumption and private investment. The model will be parameterized and solved for the Bolivian economy. Actually, the government is retrieving fiscal policy as its main tool to attack poverty and aims to put government expenditure and investment as the foremost instruments to promote growth and welfare. The second-order approximation technique will be used to solve the model. The benefit of using this technique is that it allows considering second-order effects (uncertainty) and in particular it allows measurement of welfare and growth effects more precisely.

♣ Researcher Institute for Advanced Development Studies (INESAD), e-mail: cmachicado@inesad.edu.bo ♠ Researcher Institute for Advanced Development Studies (INESAD) and Ministry of Finance, e-mail: paulestrada2@gmail.com ♦ Researcher Institute for Advanced Development Studies (INESAD), e-mail: xflores@inesad.edu.bo

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I. Introduction The idea, that human capital plays an important role in explaining income differences, has been present in economists’ thinking for a long time. By some accounts, it can even be traced to the work of Adam Smith and Alfred Marshall, although it was not until the middle of the 20th century that Gary Becker (1975) and others developed a theory of human capital. This theory, according to which a person’s level of education and experience determine his or her (labor) income, was originally envisaged in a microeconomic context, but has subsequently been applied to macroeconomics. Growth accountants such as Denison (1967) and Jorgenson and Griliches (1967) examined to what extent changes in the quality of the workforce could explain the “residual” total factor productivity (TFP) unaccounted for by increases in labor and capital inputs. However, it was the emergence of “new growth theory” and, in particular, the important contributions by Romer (1986) and Lucas (1988) that really sparked interest in the relationship between human capital and growth. Despite the obvious need, from a policy perspective, to understand the quantitative links between human capital accumulation and growth, there has been surprisingly little empirical work at the aggregate level. Gong, Greiner and Semmler (2004) attempted to estimate directly human capital externalities in a growth context. Mamuneas et.al (2001) and Heckmand and Klenow (1997) examined the link between externalities and the level of aggregate output. In the Bolivian context few works have been done in human capital and/or education, and all of them are exclusively related to a microeconomic analysis, based mostly in the use of econometric techniques. Most of these works concentrate in analyzing the quality of education.1 Only the work by Andersen and Muriel (2002) mention something related to the impact of education on poverty. Until now, there is no work that studies the impact of education and health on macroeconomic variables. The following proposal tries to fill this gap, building up a Dynamic Stochastic General Equilibrium Model (DSGE) of human capital accumulation where government spends in education, health and infrastructure2. In particular we propose to answer the following main research question: What is the impact of public expenditure policy on growth and welfare? We will adapt the rich and growing theoretical and empirical literature on the relationship between fiscal policy and economic growth in a simple general equilibrium model that explores human capital accumulation. Furthermore we plan to analyze the impact of human capital externalities. Following Tamura (1991), we will specify a model which allows for positive externalities associated with the stock of aggregate human capital. This externality

1 See Mizala, Romaguera and Reinaga (1999), Urquiola, Jimenez and Hernani (2000), Urquiola (2001) and Hernani, et.al. (2007). 2 The word “spending” is used indifferently from investment, since it includes current and capital spending.

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justifies the provision of public education, because when externalities are high, welfare maximizing education spending will be also high. The model will be based on Angelopoulos, Malley and Philippopoulos (2007), but modified to include public investment in infrastructure in a way similar to Rioja (2001) and health as in Grossman (1972). The purpose to model jointly these three types of expenditures is that it will allow us to analyze which of this type of public policies are more growth and welfare enhancing, and are indirectly, poverty reducing. First, we will build up a theoretical model of public expenditure in education, health and public investment in infrastructure. Second, we will carefully calibrate the model for the Bolivian economy. The model will be solved using the second-order-approximation technique developed by Schmitt-Grohé and Uribe (2004a). The advantage in using this perturbation method is that it allows considering second-order effects, which arise as important features in an economy with high levels of uncertainty. Third we will resort on micro simulations to analyze the impact of growth on poverty. An important fact is that the model will permit us to extract quantitative implications, because we will examine the effects of a range of externalities on growth and welfare, as well as on the main macroeconomic variables (consumption and investment). In this regard, it will be important to calibrate the model accurately and exactly to the Bolivian economy. This will allow us to be in a position to realistically assess the effects of public spending policy on growth and welfare in Bolivia. Moreover, we will be able to give hints to policymakers on how to conceive and redesign the fiscal policy in Bolivia, with emphasis on public investment decisions. II. Core research objectives The two main objectives of this study are:

A) to analyze the growth and welfare implications of public expenditure on education, health and infrastructure.

B) to quantify the impact of a public policy that divides resources between these three types of expenditures.

There are four secondary objectives:

C) to test the impact of a range of externalities and crowding out/in effects on aggregate growth and welfare.

D) to design a simple neoclassical Dynamic Stochastic General Equilibrium model,

suitable for the analysis of social issues like education and health and as an alternative to the already existing CGE models.

E) to provide policy recommendations concerning priorities for public policy, taking

into account that the government is retrieving fiscal policy instruments as key mechanisms to attack poverty.

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F) to promote a long-term research project in Bolivia consisting in the build up of

more elaborated DSGE models. We expect to put the seed for the evolution of more complicated models like the new-Keynesian DSGE models.

III. Knowledge gaps and scientific contribution of the research DSGE models have been rarely used in Bolivia. Furthermore the few DSGE models calibrated for the Bolivian economy have concentrated in the analysis of fiscal and monetary policies and none of them has analyzed until yet, social issues like education or health. The first DSGE model calibrated for Bolivia corresponds to Quiroz, et. al. (1991). The authors analyze the business cycle properties of the Bolivian economy. Machicado (2006) calibrates a DSGE model for Bolivia taking into account that the Bolivian economy is a partially dollarized economy. He analyzes the welfare gains attributed to optimal fiscal and monetary policy. Finally Estrada (2006) studies the effects of changes in external policies on the hydrocarbon and agricultural sectors. He also calibrates a DSGE model for a small and open economy (Bolivia). The other strand of General Equilibrium models which corresponds to CGE models, have been used amply since middle of the 90’s, to analyze macroeconomic policies and policy shocks. Jemio (1994) proposes an analytical model based in a Social Accounting Matrix to analyze the macroeconomic adjustment of the Bolivian Economy during the period 1970-1989. Jemio and Wiebelt (2002) also concentrate on macroeconomic issues and anti-shock policies using a modified CGE model, constructed with the support of Kiel Institute of World Economics. The first time poverty issues are being analyzed with CGE models is in the paper of Andersen and Faris (2002). Also, Thiele and Wiebelt (2003) using the Kiel model, review Bolivia’s economic and social development over the period 1985–99, and investigate the country’s future prospects for pro-poor growth. Recently, Jiménez, Mariscal and Canavire (2008) use a CGE model to analyze policies to reach the Objectives of the Millennium. The problem with these types of structural models is that they rely heavily in a Social Accounting Matrix. The National Institute of Statistics which is the institution in charge of the construction of that matrix, has stopped to construct it since 1997, and does not have any plans to continue with this project.3 This fact opens the need to analyze the economy in a general equilibrium context, but using simple, complete and up to date models. These models are certainly the dynamic neo-classical or new-Keynesian models. Furthermore, most of the Central Banks in the region are also changing their structural models with this new type of DSGE models, because they are flexible and relatively easy to modify. 3 Thiele and Piazolo build up a Social Accounting Matrix for Bolivia featuring formal and informal activities.

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Undoubtedly, this new type of models presents some restrictions when someone wants to include education, health or social issues. But we want to take this as a challenge and include human capital accumulation, and in addition calibrate the model to analyze the growth and welfare implications of public education and health expenditure jointly with public investment in infrastructure. In sum, the scientific contribution will be the analysis of fiscal policy, for the first time, using a DSGE model. The knowledge gap to close is the design of an efficient fiscal policy strategy aimed to maximize growth and/or welfare. IV. Policy Relevance In the last two years, Bolivia achieved a fiscal surplus, partly explained by the international economic boom (high commodity prices) and partly by the State management transformations that are being taken since the upcoming of the first indigenous president (Evo Morales). The government is assigning a central role to state-owned enterprises, in particular in the hydrocarbons sector and taxing extractive activities. The following graph shows that Bolivia achieved a fiscal surplus of 5.1 percent of GDP in year 2006 and 1.8 percent of GDP in year 2007. It is also shown the rate of growth of GDP, which increased from a value of 1.68 percent in 2001 to a value of 4.63 percent in 2006.

Graph No.1 Fiscal Surplus and Economic Growth

(Percentages)

-3.7

-6.8

-8.8-7.9

-5.6

-2.3

5.1

1.8

-10

-8

-6

-4

-2

0

2

4

6

2000 2001 2002 2003 2004 2005 2006 20070

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

SURPLUS(DEFICIT)Economic Growth

Source: Milenio Foundation

Notice that in the last four years the rate of growth of GDP has been on average 4 percent. This rate of growth is low compared with other countries’ rates of growth in the region. For example Perú has been growing at rates higher than 7 percent in the last years. The same

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occurs in Uruguay, Argentina and Colombia. Many reasons can explain this low rate of growth. We think that one of the reasons is that public expenditure is not being devoted in the magnitudes necessary to enhance growth. As it can be seen in graph 2, in the last years, the government has increased its investment in infrastructure (as percentage of GDP) and has decreased its investment in social issues like education and health (as percentage of GDP).

Graph No.2 Public Investment

(Percentage of GDP)

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

1990 1992 1994 1996 1998 2000 2002 2004 2006

Year

Perc

enta

ge

INFRASTRUCTURESOCIAL Health Education

Source: UDAPE

Therefore, it is of great relevance to analyze the impact on growth of the composition of public expenditure policy. As the model will concentrate on steady-state comparisons, we would be able to conclude (if our hypothesis is correct) that Bolivia is not growing at higher rates, because the government is not giving the necessary importance to education and health expenditures. We expect to show that the government will be able to maximize growth by investing much more in education and health. In graph 2 it can be seen also the public investment patterns of education and health. If we add to this patterns recurrent expenditure, the percentages will be higher. According to CAF (2007) public expenditure in education for the period 2002-2003 has been of 6.7 percent of GDP. It is a high percentage compared with other Latin American countries, but the problem is that most of this expenditure goes to the payment of teachers and to solvent a burocracy, so it is not efficiently used. This implies that a model that analyses public expenditure must contain also efficiency issues in the way policy decisions are made.4

4 For the period 2002-2003, public education expenditures as percentage of GDP are: 4.2 percent (Argentina), 4.0 percent (Chile), 2.7 percent (Ecuador), 5.1 percent (Venezuela), 2.5 percent (Perú).

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Graph 3 displays the composition of total public expenditure in social issues for the years 2000-20055. Notice that health and education expenditures represent almost 60 percent of total public social expenditures. That is the reason why we choose these two types of social expenditures to compare with infrastructure expenditures.

Graph No.3 Total Public Expenditure in Social Issues

(Percentage of Total)

0%

20%

40%

60%

80%

100%

2000 2001 2002 2003 2004 2005

Year

Perc

enta

ge

Other

Pensions

Social Management(Prefecturas)

Rural Development

Urbanism

Sanitation

Education

Health

Source: UDAPE Naturally, it will be interesting to consider, at least, three different levels of public expenditure in education: primary, secondary, and tertiary. Urquiola and Calderón (2006) report different percentages of school attainment for different ages: 92.1 percent (age 6-7), 97 percent (age 8-13) and 87 percent (age 14-18). Certainly the effects on growth and welfare will be different and it will be of great significance to measure exactly these impacts. The same is true for infrastructure investments. Around 90 percent of total public investment in infrastructure is done in transportation (roads). The rest is invested in energy, water resources and telecommunications. It will be possible to consider different scenarios considering investments in different types of infrastructure. In sum, we will disentangle if the best Bolivia can do is to invest its increasing fiscal resources in education, in health or in infrastructure, in order to have a measurable impact on social indicators. In this behalf, the model to be calibrated will give us an insight of the magnitude of the macroeconomic impact of public expenditure. Furthermore as it is going 5 Includes current and capital expenditures.

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to be accurately calibrated, we will be able to measure exactly the magnitudes of the impact, make simulations and give errorless policy implications. In our model, we are going to evaluate also the externalities of public education expenditure and the crowding out effects of public investment in infrastructure. The externality in education arises as a result of the idea that the existing know-how of the economy provides an external positive effect. This is the typical hypothesis of the learning-by-doing effect presented by Romer (1986). The crowding out effect of public infrastructure emerges as a result of the form public infrastructure is financed, in particular if it is financed by income or capital taxes as in Rioja (2001). This assumption is not unreal as it can be seen in graph 4 where taxes are the main source of government recurrent income.

Graph No.4 Composition of Government Current Income

0%10%20%30%40%50%60%70%80%90%

100%

2000 2001 2002 2003 2004 2005 2006 2007

Year

Perc

enta

ge

Other Incomes

Current Transfers

Other Enterprises

Hidrocarbons Sales

Tax on Hidrocarbons

Tax Revenue

Source: UDAPE

We are sure that the results of the research will lead to a serious debate related to public policies and it will contribute in terms of a quantitative analysis. The absence of appropriate macroeconomic tools has penalized quantitative analyses in the last years. More generally, it must be recognized that there are few instruments which can relate macroeconomic policy and microeconomic behavior. DSGE models are however the exception in this area. V. Methodology The goal of this study is to build a simple neoclassical DSGE model of an open economy and calibrate it for the Bolivian economy. Recent years have witnessed the development of a new generation of DSGE models that build on explicit microfoundations with optimizing agents. Major advances in estimation methodology allowed estimating variants of these models that are able to compete with more standard econometric models. Accordingly, the new generation of microfounded DSGE models provides a framework that appears

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particularly suited for evaluating the consequences of public spending on education, health and infrastructure. We will construct a DSGE model of human capital. The model will be based on Angelopoulos, Malley and Philippopoulos (2007), but modified to include public investment in infrastructure as in Rioja (2001) and health as in Grossman (1972). This modification will allow us to compare the impact of three expenditure policies, which appear to be important to enhance growth and welfare. The agents of the theoretical model are a large number of identical households, identical firms and the government. The assumption of identical households will not allow us to analyze poverty issues in a direct way, nevertheless our aim is to show that education or human capital accumulation is the engine of long-term growth and so it is the engine of poverty reduction (indirectly). Household’s preferences are given by:

∑∞

=00 ),(

ttt

t SCUE β (1)

where Ct represents consumption and St represents the stock of health in period t. Each household saves in the form of investment It, and also has one unit of time endowment in each period, which allocates between work (ut) and education (et). Each household receives interest income rtKt, labour income wtutHt and dividends paid by firms Πt. So, the household’s budget constraint is

0

1 (1 ) (1 )s h K h htt t t t t t t t t t t t t tC I G q X r K w u H X Gψ τ τ π++ + + = − + − + + + (2)

where h

tX represents the household’s external debt and ψGts means that the household will

invest a fraction ψ in health promoting activities, while the rest will be invested by the government.6 Alternatively, the model may include a tax on consumption ( c

tτ ) and a tariff ( mtτ ), in which

case the household’s budget constraint will be:

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(1 )(1 ) (1 ) (1 )(1 ) (1 )m c c s h K c ht t t t t t t t t t t t t t t t

htt t

C I G q X r K wu H

X G

τ τ τ ψ τ τ τ

π

++ + + + + + = − + + − +

+ + + (2’)

Human capital evolves according to the following relation:

6 Case and Deaton (2004) use a similar reasoning.

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ttthtt

ht BHHeHH θθδ −+ +−= 1

1 )()()1( (3) where Bt=B(gt

e)η represent human capital productivity. Notice that it depends on gte which

is the average per household public education expenditure expressed in efficiency units.7 Household’s own also physical capital that evolves according to the typical relation:

tp

tt KIK )1(1 δ−+=+ (4) and health is updated according to

tsS

tt SGS )1(1 δ−+=+ (5) Firms will produce the final product using private physical capital Kt and effective labor utHt. Thus the production function of each firm is given by:

αα −= 1)( ttttt HuKAY (6) where At=A(θkt

g) is the technology available to firms and depends on the average public infrastructure kt

g as a share of average (per firm) human capital and θ which is an infrastructure effectiveness index. Finally, the government invests in education (Ge), in health (Gs), in infrastructure (Gi) and in other activities (Go). Thus, the government budget constraint can be represented by:

∑ ∑= =

+=+−++N

h

N

httt

httt

kt

ot

st

it

et HuwKrGGGG

1 1)1( ττψ (7)

where the right hand side of equation (7) represents income taxation from τk

t and τht which

are the capital and labor tax respectively. All this Gs represent capital spending. Nevertheless it could be able to include recurrent spending by assessing that a fraction υ of each spending represents capital spending and 1-υ is recurrent spending. The value of each fraction υ is different depending on the type of government spending. Certainly, we should modify the other equations of the model by including only the fraction that represents capital spending. For instance in equation (3), Bt would depend on υge

t and not only on get.

On the other hand, according to the alternative tax policy given by equation (2’), a more realistic government budget constraint would be:

7 It can be thought also as the learning-by-doing effect.

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( ) ( ), 1 1

1 1

(1 ) (1 )

(1 )

N Ne i s o m h f c m h ht t t t t t t t t t t

h f h

N Nk c h h ht t t t t t t t

h h

G G G G C Y C I

r K w u H

ψ τ τ τ

τ τ τ

= =

= =

⎡ ⎤+ + − + = − + + + +⎢ ⎥⎣ ⎦

+ + +

∑ ∑

∑ ∑ (7’)

The external sector is introduced as in Chumacero et al (2004). In order to avoid modeling the world credit market, we assume that the country faces an upward-sloping supply schedule for debt:

( ) ( ) ( )1 1

21 1 1

( ), ' 0

ˆ1 1 ; 0,t t

tt q t q q t q q qf

t

q q X qXq q q v vY

ρ ρ ζ ρ σ+ ++ + +

= >

= + + + + + Ν (8)

Then equation (9) describes the equilibrium in the importable good market ( f

tY ), which shows that the current account (CA) balance must be compensated by the capital account balance.

( ) ( )1 1 11 , 1

1N N

h h f h h p h h ot t t t t t t t t

h h f

CA X X Y C K K q X Gδ ξ+ + += =

⎡ ⎤= − − = − − + + − −⎣ ⎦∑ ∑ (9)

where ξ is the ratio of government expenditure in the good f

tY . Government investment in infrastructure Gi is used to augment the stock of public capital whose motion is given by:

gt

git

gt KGK )1(1 δ−+=+ (10)

where 0≤δg≤1 is a constant depreciation rate on public physical capital. These models are difficult to solve analytically. The alternative is to use numerical methods. Therefore, we will adopt functional forms for the utility and productions functions and give values to the parameters of the model to match exactly real data of Bolivia. Most of the parameters will be calibrated. Other parameters will be calculated, for instance the parameter θ will be calculated using infrastructure loss indicators as in Rioja (2003) Bearing in mind that we will calibrate, for the first time, a model of human capital and health, one has to be very rigorous at this stage to simulate exactly the economy and in particular the education and health sector. Failure to exactly match the National Account ratios and key indicators will result in the extraction of inadequate results and not precise policy implications.

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The solution to the DSGE model and the simulations will be approximated using the second-order approximation method proposed by Schmitt-Grohé and Uribe (2004a). The main advantage of this method is that it takes into account second-order terms or volatilities which enriches the analysis, since it represents uncertainty in the economy. The welfare gains associated with an increase in infrastructure investment will be computed as in Schmitt-Grohé and Uribe (2004b). We will measure welfare as the conditional expectation of lifetime utility as of time zero, that is,

∑∞

=

≡=0

00 )(t

jt

t xuEVwelfare β (11)

where xt

j is the contingent plan for any argument in the utility function. Basically we will compare two regimes, a reference policy regime and an alternative regime and compute the gains (costs) between both regimes. Another advantage of using second-order approximations to solve the model is that welfare gains are measured more precisely. Kim and Kim (2003) criticize methods based on first-order approximations, like linear-quadratic and others, because they are so inaccurate as to generate even spurious welfare reversals. The analysis will concentrate in the solution of the second-order approximation of the model around the deterministic steady state. We will examine the general equilibrium effects on steady-state growth and welfare of increasing the public education spending share and/or public health spending share and/or infrastructure share in the presence of human capital externalities, crowding-out and crowding-in effects of infrastructure. We will be able to construct different scenarios by differentiating between educational levels (for example, primary, secondary and tertiary) in order to provide more detailed policy recommendations. This is an easy task that can be done by calibrating the model for each different level of education. Using the DSGE model we can simulate different scenarios for the Bolivian economy, by changing the values of key parameters. For instance, it will be interesting to see how the results change when we change the efficiency parameters η (education productivity), θ (infrastructure) and ψ (health). Finally, with the results of the DSGE model, we will estimate the indirect impact of growth on poverty by performing micro-simulations. In a very simple form we may resort to the estimates of the poverty-growth elasticity in Bolivia, made by Gasparini et.al (2007), to compute the poverty impact of the different growth rates that the model will generate using different types of fiscal policy. Another possibility is to work directly with the Bolivian Household’s Survey (MECOVI). For instance, from the MECOVI we can extract the total number of persons that benefit from government spending in education. Then by changing the government spending policy in education in the model and computing the magnitude of the change in income per capita,

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we can simulate the same change for the group selected in the MECOVI. In other words we will have two functions D{} from which we will like to infer the magnitude of change and the impact of this change on some poverty or inequality measure.8

},,{),',{)( * ξξ et

het

h GZDGZDL −=• (12) In equation (12) D* will be our simulated scenario and D our benchmark scenario (counterfactual). A similar exercise has been done by Gutiérrez (2008), which is going to be our reference paper for our micro-simulations. Additionally, an interesting extension for this analysis could be to make the same exercise but using consumption data instead of income data, which is also available from the MECOVI. VI. Data requirements and sources One of the main advantages of DSGE models is that data requirements in terms of time series are few, since most of the parameters are calibrated. As it is a macroeconomic model, primal sources of information will the National Institute of Statistics (INE) and the Central Bank from where we will extract all data related to the National Accounts. To calibrate the education and more specifically human capital accumulation, we will need consistent measures for human and physical capital. Probably this could be a problem for the Bolivian case, since most relevant empirical studies do not provide data that allows distinguishing between inputs to and output from the human capital production function. Nevertheless we will use measures of school enrolment ratios or years of schooling as general proxies of labor quality or human capital. These data can be extracted from the household’s survey (MECOVI) and from statistics of the Ministry of Education. Health data will be extracted from the Demography and Health National Survey (ENDSA), while infrastructure data and some key indicators will be extracted from the Economic Policy Department of Bolivia (UDAPE) and from the World Bank.9 For the microsimulations we will use the Bolivian Household Surveys (MECOVI) which are available for the years 1999, 2000, 2001, 2002-2003, 2005 and 2007. VII. Dissemination strategy The relevance and impact of this work will depend also on activities intended to discuss and disseminate the preliminary and final results. This research is circumscribed in the area of Modeling and Policy Impact Analysis (MPIA), so it will be important to disseminate the results primarily to policy makers working in the fiscal sector in Bolivia. In addition, we will disseminate the results among the academia and civil society.

8 Gini coefficient, Theil coefficient, Transformed Coefficient of Variation, Poverty Incidence, Poverty Gap, and Poverty Severity. 9 The World Development Report.

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The study will not address the poverty implications of public expenditure policies in a direct manner; however it will be important to influence public policies to ensure that their poverty impacts are properly taken into account. We believe that by demonstrating that a change in the composition of fiscal spending, concentrated more in social issues, maximizes growth and welfare, we will influence the fiscal strategy to attack poverty in the next years. The direct contact with policy makers is one of our foremost objectives. The senior researcher (Carlos Gustavo Machicado) is a formerly researcher from UDAPE, which is the Research Office of the Ministry of Planning. He has a direct and close contact with the actual Executive Director of UDAPE (Lic. Viviana Caro), so it will be easy to establish a regular contact and interact with their fiscal policy researchers, through meetings, workshops and discussion tables. We have already established contact with Fernando Jimenez who is a director of the Vice-Ministry of Public Investment and External Financing (VIPFE). He expressed his interest in the results of the paper and he plans to use them in the future to guide the public investment policy. In addition, Carlos Gustavo Machicado teaches at the Bolivian Catholic University (UCB), the Bolivian Private University (UPB) and the Andean University “Simón Bolivar”. These universities are very interested in disseminate these results among the academy. Academic seminars will be organized jointly by INESAD and the mentioned universities. In addition, the Andean University has some executive master’s degree programs directed to people that work in the public sector. Therefore, seminars will be organized in this university to influence not only policy makers, but also public sector officials who implement day to day the public policies. The institution where we belong (INESAD) is one of the leading research institutes in Bolivia, with some of their members working in the public sector. One of the main researchers, Osvaldo Nina, is the actual Vice-President of the Bolivian Central Bank. Therefore, it will be possible to present the results to Central Bank executives and organize open seminars with the Central Bank in order to disseminate the results to the civil society. At the INESAD, we work also with Luis Carlos Jemio, who is an expert in CGE models and a former Minister of Finance. We will be able to learn a lot from his experience (academic and empirical) by interacting continuously with him and sending preliminary reports about the progress of the research and organizing discussion seminars with former policy makers. INESAD’s Director –Lykke Andersen- will provide also technical support. Related to publications and media to disseminate the results, INESAD is the first institution in Bolivia to have its Working Paper Series included in the World’s largest on-line database of economics working papers and journal articles (EconPapers). The final version of the research will be published as a Development Research Working Paper (http://www.inesad.edu.bo/wps.htm).

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Preliminary results will be transmitted through our institutional blog, the Monday Morning Development Newsletter (MMDN) (http://www.inesad.edu.bo/mmblog.htm). The brief MMDN is intended as a “snack for thought” for the development community and other policy makers in Bolivia. These brief articles are distributed by mail, every Monday, to more than 400 people around the world. Finally, we plan to organize a big national seminar to present the final draft of the paper, where we will invite other PEP researchers. We hope PEP, could give us a grant for the organization. The aim of this seminar is to disseminate not only our work, but also PEP’s network in poverty research. All of these dissemination activities aim not only to present the results, they also aim to get a feedback from the audiences and people with whom we will interact. This will be of great relevance to ensure the quality of the paper. VIII. Research team and institutional background The research team consists of the following three members: Senior Researcher: Ph.D. Carlos Gustavo Machicado, Institute for Advanced

Development Studies (INESAD), La Paz, Bolivia. Researcher 1: MSc Paul Estrada, Institute for Advanced Development Studies

(INESAD), La Paz, Bolivia. Researcher 2: MSc.(c) Ximena Flores, Institute for Advanced Development Studies

(INESAD), La Paz, Bolivia. Carlos Gustavo Machicado works as researcher at INESAD. He holds a Ph.D. in Economics from the Doctorado Latinoamericano (University of Chile). He is also professor at the Bolivian Catholic University (graduate level) and at the Bolivian Private University (undergraduate level). His recent research has focused on General Equilibrium Models, in particular DSGE models. He has developed a model that analyzes the dollarization process in Bolivia and recently he worked on a paper related to infrastructure investments in five Latin American countries (paper elaborated for the CAF). Paul Estrada woks as consultant at the Bolivian Ministry of Finance. He holds a Master's Degree in Economics at the University of Chile. He has interest in research on general equilibrium models. He calibrated a DSGE model for Bolivia in his M.Sc. thesis. Ximena Flores is junior researcher at INESAD. She finished her Master’s Degree studies in economics at the University of Chile. She is expected to write her M.Sc. thesis on the Quality of Education in Latin America, using the new educational assessment SERCE. She worked as research assistant at the Economic Policy Department of Bolivia (UDAPE) and made an internship at the Comunidad Andina de Naciones (CAN). For further information, please consult the CVs in Appendix.

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The research project will be based at the Institute for Advanced Development Studies (INESAD) in La Paz, Bolivia. INESAD was created in 2003, and quickly became Bolivia’s leading development research institute, with close to 50 working papers and a regular Monday Morning Development Newsletter, several of which are on the topic of education (see www.inesad.edu.bo). The institute will provide office space, computers, Internet access, telephone services, and all the stuff necessary to assist the researcher and the research assistant with practical matters. IX. Expected Capacity Building The Institute for Advanced Development Studies (INESAD) was created to analyze particular problems of underdevelopment countries, with particular attention in Bolivia. One of the main topics that should and is effectively being analyzed is the problem of development and growth. As part of this area, particular attention is put in education policy as a way to leave the underdevelopment. As researchers from the INESAD, we want to improve the use of general equilibrium models to analyze economic issues like growth, optimal policies, poverty, natural resources management and other themes. In previous years, researchers Lykke Andersen and Luis Carlos Jemio have trained junior researchers in the use of CGE models. See for example the paper by Andersen et.al. (2006). Our main objective is to train now, other junior researchers in the use of this other type of general equilibrium models which are the DSGE models. New computational tools and easy to work with them have been developed in the last years. See for instance the toolkits of Uhlig (1997), Schmitt-Grohé and Uribe (2004a) and Mancini Griffoli (2007). In this research it will be shown how to work with all of these toolkits, paying special attention to second-order approximation techniques or perturbation methods.10 Carlos Gustavo Machicado is specialist in Dynamic Stochastic General Equilibrium Models. In fact, one of his Dissertation papers consisted in building up a DSGE model for a partially dollarized economy. The model has been calibrated for Bolivia. Recently, he finished also a paper where he calibrates another DSGE model for five Latin American countries (Machicado, 2007). In that model, he analyzes the macroeconomic effects of raising public investment in infrastructure (as a share of GDP) in those countries. As specialist in this area and as professor he will train people in building up DSGE models and programming in Matlab. The trainees will be the research assistants from INESAD, but also people from the Central Bank and the Private University in Bolivia which are the two institutions where he gives lectures in DSGE models.11 Paul Estrada is a researcher in Dynamic Stochastic General Equilibrium Models, woks as consultant at the Ministry of Finance of Bolivia. He write the paper “Economía Pequeña,

10 In the team we will include our research assistants as junior researchers, they are: Soraya Román, Mauricio Villalba and Horacio Valencia. 11 Actually, the Central Bank and the Private University of Bolivia are the unique institutions that have Diplomas in General Equilibrium models.

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Abierta, Exportadora de Gas y Soya, con Shocks Internos y Externos: Cambios que Bolivia no esperaba” presented at the annual meeting of the Economics Society of Chile (September 2006). Ximena Flores is working in her M.Sc. thesis, which is on the topic of education. During her research, she has build up an interesting and complete data base on education indicators. Now she is expanding her horizons analyzing education quality in Latin America. Therefore, we will expand our knowledge in how to measure education and quality of education. For instance, she will train people in the measure of human capital accumulation and in the use of cognitive skills to measure the quality of education. Theoretically, the paper contributes to the growth literature. In particular to the literature initiated by Romer (1986) and Lucas (1988) where knowledge and human capital accumulation arise as key determinants of endogenous growth. In addition, since the paper by Grossman (1972) little improvements have been done in incorporating health in macroeconomic models. We also aim to expand our capacity in this area.12 In sum, we aim to strengthen the INESAD as the reference institution in Bolivia for General Equilibrium Models (CGE and DSGE models). We want to show and widespread the advantages of micro founded forward-looking rational expectations models as a powerful tool to analyze key relations and variables. In addition, we hope to put the seed for a wide use of this type of models in the policy making process in public institutions. X. Any ethical, social, gender or environmental issues or risks which should be noted There is no ethical, social, gender or environmental issues or risks related to this research project. Bolivia is a democratic country, so everybody is free to express his opinion and to develop his ideas in a scientific way, as this research is going to be. XI. List of past, current or pending projects in related areas involving team members As already mentioned, Carlos Gustavo Machicado is specialist in this type of general equilibrium models and in general equilibrium models in general. He already has two calibrated DSGE neoclassical models for the Bolivian economy. Although those models are simple, they provide important insights related to macroeconomic impacts of monetary and public investment policies. Actually, he is working in a general equilibrium model of industrialization. He with two coauthors plan to analyze the impact of big changes in institutional arrangements like an agricultural reform in the process of capital accumulation. We plan to show that an important increase in productivity in the agricultural sector is a key ingredient for an industrialization process. This project is in line with the papers of Hansen and Prescott (2002) and Gollin, Parente and Rogerson (2002).

12 See, e.g. Barro and Sala-i-Martin (2004), and Aghion and Howitt (1999) for references as well as Romer (1990) for an excellent review paper.

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Paul Estrada is actually working as consultant at the Ministry of Finance of Bolivia develop a methodology for sub-national fiscal performance. Paul is also a member of INESAD team working on this research proposal. Ximena Flores is actually working as consultant at the Ministry of Hydrocabons and preparing her M.Sc. thesis on education issues. XII. References Aghion, P. and P. Howitt (1998) “Endogenous Growth Theory. The MIT Press. Cambridge,

Mass. Andersen, Lykke E. and Beatriz Muriel (2002) “Cantidad versus Calidad en Educación:

Implicaciones para Pobreza.” Instituto Nacional de Estadística, La Paz, Bolivia. Andersen, L. E. and Robert Faris (2002) “Natural Gas and Income Distribution in Bolivia”

Andean Competitiveness Working Paper, Center for International Development, Harvard University.

Andersen, L., J. Caro, R, Faris and M. Medinaceli (2006) “Natural Gas and Inequality in Bolivia after Nationalization”, Development Research Working Paper 05/2006. INESAD.

Angelopoulos, K., Jim Malley and A. Philippopoulos (2007) “Public Education Expenditure, Growth and Welfare”, University of Glasgow and CESifo, mimeo.

Barro, R. (1990) “Government spending in a simple model of endogenous growth”, Journal of Political Economy, 98, pp. S103-S125.

Barro, R. and X. Sala-i-Martin (2004) “Economic Growth, Second Edition, The MIT Press, Cambridge, Mass.

Becker, Gary S. (1975) “Human Capital” 2nd edition, Chicago: University of Chicago Press.

Case, A. and Angus Deaton (2004) “Broken down by work and sex: how our health declines” Research Program in Development Studies, Center for Health and Wellbeing, mimeo.

CAF (2007) “Oportunidades en América Latina, Hacia una major política social”, Reporte de Economía y Desarrollo.

Chumacero, R., Rodrigo Fuentes and Klaus Schmidt-Hebbel (2004) “Chile’s Free Trade Agreements: How Big is the Deal?,” Working Paper No. 264, Central Bank of Chile.

Denison, Edward F. (1967) “Why growth rates differ: postwar experience in nine Western countries”, Washington, DC: Brookings Institution.

Estrada, P. (2006) “Economía Pequeña, Abierta, Exportadora de Gas y Soya, con Shocks Internos y Externos: Cambios que Bolivia no esperaba”, Universidad de Chile.

Gasparini, Leonardo, Federico Gutiérrez and Leopoldo Tornarolli (2007), “Growth and Income Poverty in Latin America and the Caribbean: Evidence from Household Surveys.” Review of Income and Wealth, 53(2), pp. 209-245.

Gollin, D., S. Parente and R. Rogerson (2002) “The Role of Agriculture in Development” in Economic Development Across Time and Space, AEA Papers and Proceedings, Vol. 92, No.2, pp.160-164.

Grossman, M. (1972) “On the Concept of Health Capital and the Demand for Health”, Journal of Political Economy, Vol. 80 (2), pp.223-255.

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Gutiérrez Claudia (2008) “Analysis of Poverty and Inequality in Bolivia, 1999-2005: A Microsimulation Approach”, Development Research Working Paper Series No. 01 2008. INESAD, La Paz-Bolivia.

Hansen, G. and Edward C. Prescott (2002) “Malthus to Solow”, American Economic Review, Vol. 92, No. 4, pp. 1205-1217.

Hernani, W., Wilson Jiménez, Miguel Vera, Franz Arce and Ludwing Torres (2007) “Schools, Teachers and Academic Achievement in Bolivia” ARU Foundation, mimeo.

Jemio, Luis Carlos (1994) “Ajuste Sectorial y Macroeconómico en Bolivia (1970-89)”, Análisis Económico, Vol. 10, págs: 21-73.

Jemio, L. C. and Manfred Wiebelt (2002) “Macroeconomic Impacts of External Shocks and Anti-Shock Policies in Bolivia: A CGE Analysis”, Kiel Working Paper No. 1100, Kiel Institute of World Economics.

Jiménez, W., M. Mariscal y G. Canavire (2008) “Políticas para Alcanzar los Objetivos de Desarrollo del Milenio en Bolivia: Costos y Escenarios de Financiamiento bajo un Modelo de Equilibrio General Computable y Microsimulaciones. PNUD. MIMEO.

Jorgenson, Dale W. and Griliches, Zvi (1967) “The explanation of productivity change”, Review of Economic Studies, 34, pp. 249-280.

Lucas, R. E. (1988) “On the mechanics of economic development”, Journal of Monetary Economics, 22, pp. 3-42.

Machicado C. G. (2006) “Welfare Gains from Optimal Policy in a Partially Dollarized Economy”, Development Research Working Paper No. 10/2006.

Machicado C. G. (2007) “Macroeconomic and Welfare Effects of Public Infrastructure Investment in Five Latin American Countries”, Development Research Working Paper No. 14/2007.

Mancini Griffoli Tommaso (2007). "An Introduction to the Solution and Estimation of DSGE Models" Dynare V4 - User Guide.

Mizala, A., Pilar Romaguera and Teresa Reinaga (1999) “Factores que inciden en el rendimiento escolar en Bolivia”, Documento de Trabajo No. 61, Centro de Economía Aplicada, Universidad de Chile.

Quiroz, J. A., Bernasconi, F. A., Chumacero, R. A. and Revoredo, C. I. (1991) “Modelos y realidad. Enseñando macroeconomía en los noventa”, Revista de Análisis Económico 6(2), ILADES, Georgetown University.

Rioja, F.K. (2001) “Growth, Welfare, and Public Infrastructure: A General Equilibrium Analysis of Latin American Economies,” Journal of Economic Development, Vol. 2, pp. 119-130.

Romer, P.M. (1986) “Increasing returns and long-run growth”, Journal of Political Economy, 94, pp. 1002-1037.

Schmitt-Grohé S. and M. Uribe (2004a) “Solving dynamic general equilibrium models using a second-order approximation to the policy function”, Journal of Economic Dynamics and Control, 28, pp. 755-775.

Shmitt-Grohé, S. and Martín Uribe (2004b) “Optimal Simple and Implementable Monetary and Fiscal Rules,” Duke University, manuscript.

Thiele, R. and D. Piazolo (2003) “A Social Accounting Matrix for Bolivia Featuring Formal and Informal Activities”, Cuadernos de Economía 40.

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Thiele, R. and Manfred Wiebelt (2003) “Attacking Poverty in Bolivia – Past Evidence and Future Prospects: Lessons from a CGE Analysis” Documento de Trabajo No. 06/03, IISEC, La Paz – Bolivia.

Uhlig, H (1997), “A Toolkit for Analyzing Nonlinear Dynamic Stochastic Models Easily," Manuscript, University of Tilburg.

Urquiola, M., W. Jiménez, M. Talavera and W. Hernani-Limarino (2000) “Los Maestros en Bolivia. Impacto, incentivos y desempeño”. Maestrías Para el Desarrollo, Universidad Católica Boliviana. La Paz, Bolivia.

Urquiola, Miguel (2001) “Identifying Class Size Effects in Developing Countries: Evidence from Rural Schools in Bolivia”, Policy Research Working Paper 2711, The World Bank.

Urquiola, M and Calderón, V. (2006) “Apples and oranges: Educational enrollment and attainment across countries in Latin America and the Caribbean”, International Journal of Educational Development, 26(6), pp. 572-590.

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Appendix : CVs of Researchers

Carlos Gustavo Machicado Salas Institute for Advanced Development Studies (INESAD)

Calle 21, No. 8350, Piso 7, La Paz – Bolivia Telephone: 591-2-2146069, 591-77231809

cmachicado@inesad.edu.bo

_________________________________________________________________________

PERSONAL INFORMATION: Date of Birth: June 5th 1973 Citizenship: Bolivian

EDUCATION:

Universidad de Chile – Santiago (Chile), Ph.D., Economics13 2006

Pontifical Catholic University - Rio de Janeiro (Brazil), M.Sc., Economics 2000.

Bolivian Catholic University - La Paz (Bolivia), B.A., Economics 1997.

German School “Mariscal Braun” – La Paz (Bolivia), B.Humanities 1991

PROFESSIONAL EXPERIENCE: - Professor, Department of Economics, Bolivian Catholic University, La Paz – Bolivia, 2007. - Professor, Department of Economics, Bolivian Private University, La Paz – Bolivia, 2006-2007. - Professor, Department of Economics, University of Chile, Santiago de Chile, 2005. - Analyst, Unit of Analysis of Social and Economic Policies (UDAPE - Ministry of Finance), La Paz – Bolivia, 2000-2003. - Professor, Department of Economics, Bolivian Catholic University, La Paz – Bolivia, 2000 – 2002. - Research Assistant, Institute of Social and Economic Research (IISEC), Bolivian Catholic University, La Paz – Bolivia, 1996-1997. - Teaching Assistant, Department of Economics, Bolivian Catholic University, La Paz – Bolivia, 1996 – 1997 COURSES TAUGHT:

13 Doctorado Latinoamericano – Universidad de Chile (Chile), ITAM (México) and Universidad Torcuato di Tella (Argentina).

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• Monetary Theory and Policy, Bolivian Private University (undergraduate), spring 2007.

• Macroeconomics in Developing Countries, Bolivian Catholic University (graduate), fall 2007.

• Economic Policy, Bolivian Private University (undergraduate), fall 2007. • Econometrics I and II, Bolivian Private University (undergraduate), spring 2006. • Macroeconomics I, University of Chile (undergraduate), 2005. • Monetary Economics, Bolivian Catholic University (undergraduate), spring 2000 –

spring 2002. • Microeconomics I, Bolivian Catholic University (undergraduate), spring 1996 – fall

1997 CHAPTERS IN BOOKS: • Privatization and Firm Performance in Bolivia, in Privatization in Latin America: Myths

and Realities, Chong, A. and F. Lopez-De-Silanes (eds.), Stanford University Press, 2005 (joint with K. Capra, A. Chong, M. Garrón and F. López-de-Silanes).

PUBLICATIONS: • “Macroeconomic and Welfare Effects from Public Infrastructure in Five Latin

American Countries”, Development Research Working Paper No.14, INESAD, La Paz – Bolivia, 2007..

• “La Enseñanza de Economía en Bolivia y Chile” (joint with Lourdes Espinoza and Katia Makhlouf), Development Research Working Paper No.10, INESAD, La Paz – Bolivia, 2007.

• “Liquidity Shocks and the Dollarization of a Banking System” (forthcoming Journal of Macroeconomics)

• “Growth and Banking Structure in a Partially Dollarized Economy”, Development Research Working Paper No.2, INESAD, La Paz – Bolivia, 2007.

• “Welfare Gains from Optimal Policies in a Partially Dollarized Economy”, Development Research Working Paper No.10, INESAD, La Paz – Bolivia, 2006

• “Essays on Partially Dollarized Economies” Thesis submitted to the Doctorado Latinoamericano (Universidad de Chile) in fulfillment of the requirements for the degree of Doctor of Philosophy, Santiago de Chile, 2006.

• “Estructura del Sector Turismo en Bolivia” joint with C. Delgadillo, A. Lazo and G. Urcullo, UDAPE, La Paz – Bolivia, 2003.

• “Estructura del Sector Minero en Bolivia” joint with L. Castro y M. Sanabria, UDAPE, La Paz – Bolivia, 2003.

• “Network Externalities como Determinantes de la Dolarización del Sistema Bancario en Bolivia” Revista Controversias y Consensos, Cochabamba – Bolivia, December 2002.

• “Un Modelo Matemático de Crecimiento para el Sector Minero”, UDAPE, La Paz – Bolivia, 2001.

• “Determinantes da Dolarização na Bolívia: Network Externalities” Thesis submitted to the Department of Economics of the Pontifical Catholic University of Rio de Janeiro in

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fulfillment of the requirements for the degree of Master in Science, Rio de Janeiro – Brazil, March 2000.

• “La dolarización y el déficit fiscal en Bolivia” Documento de Trabajo 04/97 IISEC, Bolivian Catholic University, La Paz – Bolivia, 1997

• “El fenómeno de la dolarización en Bolivia” Revista Controversias y Consensos, Cochabamba - Bolivia, December 1997.

• “Señoriaje: Financiamiento Monetario del Déficit Fiscal” Thesis submitted to the Department of Economics of the Bolivian Catholic University in fulfillment of the requirements for the degree of Bachelor in Economics, La Paz - Bolivia, October 1997.

WORK IN PROGRESS • “The Role of Institutions in Development: A Model of Structural Transformation”

(joint with Antonio Saravia). CONFERENCE AND SEMINAR PRESENTATIONS: • 2007/10: Latin American Meetings LACEA-LAMES, Bogotá - Colombia, October 4-6,

2007, organized by Fedesarrollo and the Department of Economics, Universidad de los Andes.

• 2007/05: Bolivian Catholic University, Department of Economics Seminar, organized by Institute for Advanced Development Studies.

• 2006/11: Latin American Meetings LACEA-LAMES, Mexico City, November 2-4, 2006, organized by ITAM.

• 2006/04: Center for Applied Economics (CEA), Universidad de Chile. • 2005/10: The Tenth Annual Meeting of the Latin American and Caribbean Economic

Association (LACEA), Paris, France, October 27-29, 2005, organized by The American University of Paris.

• 2005/09: Annual Meeting of the Economic Society of Chile. Viña del Mar, September 28-29.

• 2005/04: Center for Applied Economics (CEA) Universidad de Chile. CONSULTING: • Modelo de Evaluación de Propuestas de Descentralización (CEPAL – GTZ),

November, 2006. • Eficiencia y Equidad: El Reto de la Descentralización (CEPAL-GTZ), October 2006. • Lineamientos de Política Macroeconómica (UDAPE – PNUD), January 2006. AWARDS AND FELLOWSHIPS: • MECESUP (Chilean Government’s Program for the Improving of Superior Education):

PhD’s Fellowship, Universidad de Chile, 2003 – 2006.

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• CAPES (Brazilian Government’s Agency for Graduate Studies): Master’s Fellowship, 1998 – 2000.

• Award for the best undergraduate thesis - Asociación de Esposas de Diplomados en Altos Estudios Nacionales – April 1999.

LANGUAGES AND COMPUTER SKILLS • Spanish (native), English (fluent), German (fluent) and Portuguese (fluent). • Matlab, Stata, E-views, SWP, Tex. REFERENCES Todd Keister, Senior Economist, Macroeconomic and Monetary Studies Function Research and Statistics Group, Federal Reserve Bank of New York, 33 Liberty Street New York, NY 10045, Phone: (212) 720-2267, Todd.Keister@ny.frb.org. Romulo Chumacero, Director - PhD in Economics, Department of Economics – Universidad de Chile, Central Bank of Chile, Av. Diagonal Paraguay 257 – Ofic. 1603-c Santiago de Chile, Phone: (56-2) 678-3436, (56-2) 678-3413, rchumace@econ.uchile.cl. Juan Antonio Morales, Full Time Professor, Maestrías para el Desarrollo, Campus UCB, Bloque "G", Av. 14 de Septiembre esq. calle 2, Obrajes, La Paz – Bolivia, Phone: (591-2) 278-6719, (591-2) 278-6729, jamorales@mpd.ucb.edu.bo.

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Paul Estrada Céspedes Personal Data:

Date of Birth: August 1, 1978. Nationality: Bolivian. Cell: (591) 7 7572341. Email: paulestrada2@gmail.com

Education:

Universidad de Chile, Faculty of Economics and Business Santiago, Chile (2004 – 2005) • Graduate Studies Program at the Masters in Economics. • Grade: Magíster in Economics.

Bolivian Catholic University, Department of Economics

La Paz, Bolivia (August 1996 – may 2003) • Grade: B.A. Economics.

Professional Experience:

Institute for Advanced Development Studies (INESAD) Researcher La Paz Bolivia (Present) Unit of Analysis for Social and Economic Policys UDAPE Economist II, Fiscal Sector – Sub direction Macroeconomic La Paz, Bolivia (May 2007 – March 2008)

University of Chile Research Assistant Santiago, Chile (August 2006 - February 2007) Interamerican Institute for Cooperation on Agriculture IICA, Representation in Bolivia Technical and trade policies La Paz, Bolivia (August 2002 - February 2004)

Technical University of Oruro, Faculty of Economics and Financial Management Teaching Seminar Terminal Thesis I of Commercial Engineering Teaching Seminar Terminal Thesis II Oruro, Bolivia (2007)

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Bolivian Catholic University Assistant professor and assistant to the Department of Economics Assistant professorship Macroeconomics La Paz, Bolivia (July 2000 – December 2001)

Publications and Presentations:

Estrada, P. (2006). "Small Open Economy, gas exports and Soy, with Internal and External Shocks: Changes that Bolivia is not expected." Economics Society of Chile. Annual Meeting of Economists 2006. (Presented at the poster session). Estrada, P. (2003). "Financing non-traditional exports from Bolivia, 1990 - 2001". Latin American Journal of Economic Development. No. 1 Sep. IISEC Socio-Economic Research Institute, Catholic University of Bolivia.

Courses Specialization:

Bolivian Catholic University La Paz, Bolivia (February – June 2008) Diploma in Teacher Education for higher education.

CEPROBOL La Paz, Bolivia (2002) Course on International Trade "Management of exports." Module: Rules of International Trade.

Bolivian Catholic University La Paz, Bolivia (1999) Management Programs Econometric. Module: Classics regression models.

Honors and Awards:

• Scholarship of Graduate Studies: Scholarship Program Japan-IDB. 2004-2005. • Scholarship of Undergraduate Studies: BISA Bank S.A. 1996 to 2003. • Distinction Honor, for having obtained 100% rating in public undergraduate

thesis: Bolivian Catholic University. 2003. • Gold Medal, for being the best management Bachelor of 1995, College Ignacio

León, Oruro - Bolivia. Languages and Computer Skills:

• Spanish (native), English (intermediate) and Portuguese (Basic). • Matlab, E-views, Gauss.

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Ximena Patricia Flores Orellana

I. PERSONAL INFORMATION » DATE OF BIRTH : December 29, 1976 » CITIZENSHIP : Bolivian » PHONES : (591-2) 2226065 – (591) 70571775 » E-MAILS : ximenaflores3@gmail.com xflores@inesad.edu.bo

II. EDUCATION

Universidad de Chile – Santiago (Chile), M. Sc.(c) , Economics 2004. Bolivian Catholic University - La Paz (Bolivia), B.A., Economics 1998.

III. EMPLOYMENT HISTORY Area Chief, Unit of Public Credit, Direction of Finance, Municipal Government of La Paz (GMLP), La Paz – Bolivia, 2007-2008. Economic Analyst (Integrant of Economic Staff as technical support of the renegotiation of the new Operation Contracts), Yacimientos Petrolíferos Fiscales Bolivianos (YPFB), La Paz – Bolivia, 2006-2007. Technical Assistance of the Macroeconomic Division, Unit of Analysis of Social and Economic Policies (UDAPE - Ministry of Finance), La Paz – Bolivia, 1999-2000. IV. WORK IN PROGRESS “Una aplicación de la descomposición de Juhn, Murphy y Pierce en el Segundo Estudio Regional Comparativo y Explicativo (SERCE)”. SERCE is a regionally designed and operated educational assessment that was conducted in 13 Latin American countries by the Laboratorio Latinoamericano de Evaluación de la Calidad de la Educación (LLECE) from the UNESCO. V. CONSULTING Junior Researcher, Grupo Integral S.R.L., La Paz- Bolivia, 2005, 2006. Junior Researcher, Cooperación Técnica Alemana (GTZ), La Paz- Bolivia, 2005, 2006.

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VI. PUBLICATIONS Research Assistant: Nina Osvaldo, “El efecto distributivo de los impuestos y del gasto social : caso de Bolivia”, Grupo Integral S.R.L., La Paz – Bolivia, 2006. Research Assistant: Nina Osvaldo, “¿Que hace la diferencia para el logro de una mayor productividad laboral? Caso de los países de bajos ingresos en América Latina?”, Research Working Paper No.1, INESAD, La Paz – Bolivia, 2007 “Fuentes de las fluctuaciones económicas en Bolivia en la década de los noventa” Thesis submitted to the Department of Economics of the Bolivian Catholic University in fulfillment of the requirements for the degree of Bachelor in Economics, La Paz - Bolivia, 2002.

VII. AWARDS

2000 Selected to represent to Bolivia (internship), Fourth Program of Trade Negotiations, Secretaría General de la Comunidad Andina de Naciones (CAN), Lima – Perú

2003 – 2004 M. Sc.’s Fellowship, Universidad de Chile, 2003-2004

V. LANGUAGES AND COMPUTER SKILLS

» Spanish (native), English (fluent) » Eviews, Stata, Gauss.

VI. REFERENCES

» Fernando Jiménez Director of External Financing, Vice-Ministry of Public Investment and External Financing, Ministry of Development Planning. Office Phones: (591-2) 2315339

» Rómulo Chumacero Escudero

Academic Director, Master Program in Economics, University of Chile Assistance Professor, Econometrics I and II (Graduate), University of Chile Office Phones: (56-2) 9783635 – 9783410

» Osvaldo Larrañaga

Ex – Vicedecano, Facultad de Ciencias Económicas y Administrativas, University of Chile Assistance Professor, Department of Economics, University of Chile Office Phones: (56-2) 9783455

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» Julio Humérez

Senior Economist of the Macroeconomic Division, Unidad de Análisis de Políticas Económicas (UDAPE) Professor, Econometrics II (Undergraduate), Universidad Católica Boliviana. Office phones: (591-2) 2375512 – 2369905 – 2374628 (UDAPE)