Towards a new consensus: poverty reduction strategies for Bolivia

Purpose – The purpose of this paper is to evaluate the viability for Bolivia of attaining the United Nations millennium development goal established in year 2000, of halving extreme poverty by 2015. Design/methodology/approach – The study is based in numerical simulation with a model of the Bolivian economy. The model pertains to the (widely defined) family of dynamic input‐output models, and represents in detail income distribution, by size and socioeconomic class. Findings – The millennium development goal of halving extreme poverty by 2015 seems to be a difficult, but attainable goal for Bolivia. Given the expected debt reduction agreed with international creditors, the goal can be attained by a combination of investment and redistribution policies. Research limitations/implications – It is implied that a new approach to development strategy is adopted. A new policy consensus is assumed to supplant the Washington Consensus. The new consensus model is based on objectives such as policy autonomy, structural change, and distributive justice. Poverty reduction strategy is a combination of policies associated with these objectives, viz. foreign debt policy, investment policy, and income distribution policy. Practical implications – The study shows that capital account regulation, investment planning and redistributive policies might conform effective strategies for attaining the millennium development goals. Originality/value – The study represents a different approach to poverty reduction strategy, which explores the economy‐wide effects of new policy instruments, particularly on growth capacity, output structure, and income distribution.