Real-World Economics Working Papers

Simulating extended reproduction:

Poverty reduction and class dynamics in Bolivia

Jorge Buzagloand Alvaro Calzadilla

Department of Economics, Göteborg University. ZMAW, Research Unit Sustainability and Global Change Hamburg University.

ABSTRACT: An extended reproduction model is used to simulate the effects of alternative poverty reduction strategies. Three policy variables are introduced: (de)indebtedness policy, investment policy and income distribution policy, contributing respectively to the objectives of policy sovereignty, structural change and social justice. The Millennium Development Goal of halving extreme poverty by 2015 seems to be a difficult, but attainable goal for Bolivia. The model shows also the effects of poverty reduction strategies on the different social classes.

Keywords: industrial policy, income distribution, economic development, investment planning

JEL Classification: B41, C61, C67