Bolivia Public Finances, 1882-2007. Challenges and restricitons of State intervention in a small, multiethnic and revolutíonary economy

Abstract

My dissertation aims at analyzing the impact of State intervention in Bolivia by looking at the long term evolution of Bolivian Public Finances, 1882-2007. My dissertation is compound by four different chapters. In the following lines, you may find a small abstract of each chapter.

According to Acemoglu, Johnson and Robinson (2002), Bolivia is a perfect example of the reversal of fortune (RF) hypothesis. This hypothesis, however, has been criticised for oversimplifying causal relationships by “compressing” history (Austin, 2008). In the case of Bolivia, a full contrast of the RF hypothesis would require a global approach to the entire postcolonial period, which has been prevented so far by the lack of quantitative information for the period before 1950. Chapter 1 aims at filling that gap by providing new income per capita estimates for Bolivia in 1890-1950 and a point guesstimate for the mid-nineteenth century. The new estimates indicate that post-colonial divergence has not been a persistent feature of Bolivian economic history. Instead, it was concentrated in the second half of the 19th century and the second half of the 20th century.

Chapter 2 aims at offering a long-term and comparative study of Bolivian public finances using a new detailed database. The new quantitative evidence allows bringing new insights on the achievements and restrictions of State intervention in the country. First of all, it shows that whereas the importance of social expenditure has constantly grown within total public spending since the late 1930s, Bolivian public revenues have always had an unbalanced structure: from the 1880s to the 1980s the State was highly dependent on trade taxes; later on, on indirect internal taxes, and taxes and non-tax revenues derived from oil and gas exploitation. Secondly, it shows that Bolivian government revenues and expenditures were relatively small and volatile until the 1980s. Finally, it confirms that Central Government fiscal deficits have been constant, reaching in some periods, such as the early 1980s, a level that was especially damaging for the overall economy. Thus, beyond the existence or not of an explicit commitment by the political leadership towards certain types of public expenditures, the effectiveness of Bolivian public finances was often hindered by the difficulty to ensure a sustained flow of revenues.

Chapter 3 aims at revisiting the debate on the evolution of Bolivian tariffs from the 1850s to the mid 1930s by presenting and discussing new quantitative evidence. Contrary to an old claim by Bolivian historiography, the chapter suggests that Bolivian tariff policy was not as passive as previously assumed and that, broadly speaking, Bolivian tariffs remained high during most of the period. Nevertheless, the chapter also suggests that tariff policy did not necessarily allow protecting those products which represented the main economic activity of the different Bolivian regions during this period of time. Two reasons would explain this result: a) the prevalence until the mid 1900s of disadvantageous trade agreements with neighboring countries as a consequence of both the initial fragility of the Bolivian State-building process and the lost of the Pacific War (1879); b) the impact that both geographical fragmentation and the regional unbalanced expansion of railways had on domestic transport costs.

A widespread view suggests that, given an initial high level of inequality, Latin American States have been controlled by small elites that did not have any interest in tax collection (Sokoloff and Zolt, 2006) –since this would imply taxing themselves- or education spending (Engerman, Mariscal and Sokoloff, 2009) –which would involve a redistribution of resources. Chpater 4 aims at analyzing if educational spending in Bolivia, either fits well into this regional description up to present times or, by contrast, changed radically and took distance from the regional pattern after the 1952 Revolution. Taking advantage of new quantitative evidence, the paper stresses that the Revolution did not imply a substantial modification of the quality and redistributive character of the Bolivian education system. Three main findings support this claim: public spending in education was hardly sustainable over time; the inexistence of a substantial support to primary education may have reduce the redistributive impact of education spending; and education outputs, either in quantity or quality terms, were often among the worse in the region

El objetivo central de mi tesis doctoral consistió en analizar el impacto de la intervención estatal en Bolivia mediante el análisis de la hacienda pública a través de un enfoque de largo plazo (1882-2007) y en perspectiva comparada con el resto de América Latina. El Capítulo 1 presenta las fuentes y la metodología utilizadas para estimar por primera vez las series del PIB de Bolivia desde 1846 hasta 1950; esta información es luego conectada con las series oficiales que empiezan precisamente ese último año. El Capítulo 2 presenta las fuentes y la metodología utilizadas para estimar por primera vez las series de ingresos y gastos públicos del Estado Central de Bolivia en forma desagregada desde 1882 hasta la actualidad. Los siguientes capítulos utilizan la anterior evidencia cuantitativa para ofrecer una nueva perspectiva sobre dos temáticas ampliamente debatidas por la literatura nacional e internacional. El Capítulo 3 brinda una nueva perspectiva sobre los niveles de protección arancelaria nominal y su capacidad de protección sobre las industrias locales desde 1880 hasta la década de 1930. El Capítulo 4 identifica la evolución de la prioridad fiscal del gasto público social, en general, y del gasto educativo, en particular, y los efectos que éste pudo tener sobre el resto de la economía desde principios del siglo XX hasta la actualidad.