labour markets and the shock treatment in bolivia

University of Calgary PressCanadian Association of Latin American and Caribbean Studies

LABOUR MARKETS AND THE SHOCK TREATMENT IN BOLIVIAAuthor(s): SUSAN HORTONSource: Canadian Journal of Latin American and Caribbean Studies / Revue canadienne desétudes latino-américaines et caraïbes, Vol. 17, No. 33 (1992), pp. 45-71Published by: University of Calgary Press on behalf of Canadian Association of Latin American andCaribbean StudiesStable URL: http://www.jstor.org/stable/41799787 .

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LABOUR MARKETS AND THE

SHOCK TREATMENT IN BOLIVIA

SUSAN HORTON Department of Economics University of Toronto

Abstract. Bolivia underwent hyperinflation followed by a textbook, successful, stabilization in 1985, but with as yet weak economic recovery. As compared to a group of 11 other developing countries, Bolivia's adjustment fell into the most severe category. This paper examines labor market outcomes and finds that although unemployment did not rise markedly, there were dramatic falls in real wages, and an increase in informalization. There is little evidence of a shift of labor into tradeable goods. Labor market rigidities cannot be faulted for the slow recovery, since the labor market showed remarkable flexibility. Instead, depressed domestic demand, insufficient foreign assis- tance, and possibly some inappropriate macro-economic policies may be to blame.

Résumé. Après une période d'hyperinflation, la Bolivie a enfin connu, en 1985, une stabilisation des prix, accompagnée cependant d'une trop faible reprise économique. Si l'on compare les ajustements que ce pays a subis à ceux de onze autres pays en développement, il figure parmi les plus touchés. Nous considérons ci-après la situation de son marché du travail. Bien que le taux de chômage n'ait pas considérablement aug- menté, les salaires ont été fortement comprimés et le secteur informel a vu croître ses effectifs. La faible reprise économique ne peut être imputée aux rigidités du marché du travail. L'aide étrangère et la demande interne se sont révélées insuffisantes. Peut-être aussi certaines politiques macro-économiques ont-elles été inefficaces.

Bolivia is a particularly interesting country to study from the view-

point of structural adjustment. In the late 1970's and 1980's it suffered from a number of fairly dramatic events: the debt crisis, falling world

commodity prices, the collapse in the world market for its main

export (tin), domestic political instability, hyperinflation, currency reorganization, a stringent stabilization which succeeded in

controlling inflation, and a structural adjustment with as yet only very modest beneficial effects on long run growth. Since Bolivia is the

poorest country in South America (and the second poorest in the Western hemisphere) it is a particularly interesting case study.

This article is divided into sections as follows: the first section

briefly describes the macro adjustment process in Bolivia. The second section puts the Bolivian macroeconomic experience in the context of

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that of 11 other developing countries. The third section presents further detailed empirical results on the more micro labour market outcomes, and the final section presents conclusions. The article is based on a longer study of Bolivia1 and comparison of 12 countries including Bolivia2 from a forthcoming book.

The Macro Adjustment Process in Bolivia.

The late 1970s and 1980s were difficult years for Bolivia, as for almost all developing countries. Bolivia since 1952 had followed a development pattern which relied heavily on the state. One important component of this was the nationalized mining industry. One indicator of the state's importance in the labor market is the large share of the state in formal sector employment (60-62 percent in 1980). 3 As in many other Latin countries industrialization involved import substitution, tariffs, and an overvalued exchange rate (although Bolivia's average tariff was relatively low as compared to other Latin countries). Agriculture remained very important in GDP, both traditional agriculture in the highlands and valleys, and newer commercial agriculture in the eastern lowlands.

Some of the seeds of the 1980's economic problems were sown in the 1970's. The boom in oil, gas and commodities, along with the dis- covery of petroleum and gas in Bolivia, led to large public capital inflows (equal to 50 percent of export receipts between 1975 and 1978, according to unpublished World Bank sources). Public investment dominated private over this period (11 percent of GDP versus 6-7 percent between 1976 and 1978). However the large role of the state in the economy, along with political instability, tended to inhibit private sector investment, and there were private capital outflows. According to the World Bank, private capital flight and unrecorded imports amounted to over 60 percent of the value of debt accumulated over the decade 1971-81. Economic growth was however respectable (5.5 percent per anum 1971-78).

Bolivia's recent macroeconomic problems began in 1978-9 when commercial banks became concerned about their exposure and slowed down lending which led to problems in debt servicing (thus the debt crisis hit Bolivia a little earlier than some of the big Latin debtors). There were a series of unsuccessful stabilization attempts between 1979 and 1985, but it was not possible to forge the necessary political consensus for these plans to succeed.4

The economic collapse finally resulted in a hyperinflation in 1984-5, the only one in the twentieth century not to result from a war or a

46



revolution according to Morales and Sachs.5 These authors attribute a lot of the progress towards hyperinflation to the government deficit. The tax base in Bolivia has traditionally been weak: however the deficit rose less because the government undertook new spending, than because it was politically unable to cut spending when one of the main sources of government spending (foreign capital inflows) dried up. Resorting to inflationary finance initially helped the government's position, but eventually led to erosion of the tax base. Economic agents (individuals, firms, and even the parastatals) delayed payments such that the amounts the government ultimately received became valueless. Some taxes (excise and property) were in nominal terms and hence their value dwindled to almost nothing: likewise the prices for government services. The overvalued exchange rate (the overvaluation itself being exacerbated by rapid inflation) meant that the real value of import taxes (collected at the official exchange rate) declined. Finally the downturn in economic activity also reduced imports and again tax receipts. Although the government ceased debt service to the commercial banks in the spring of 1984, this was not enough to prevent the final onset of hyperinflation.

The newly elected centre-right government of Paz Estenssoro put into effect in September 1985 a policy package combining elements of both stabilization and structural adjustment policy. This Nueva Política Económica (New Economic Policy, NPE) occurred at an inaus- picious time- only a month before the collapse of the world tin market. Nevertheless the stabilization aspects were immediately successful: inflation plummeted within a week or so of the decree. The longer run structural adjustment aspects have had less immediate success. Economic growth was low but positive in 1987 and 1988, after having been negative in all but one year since 1978, although this is hard to attribute purely to the reforms. Since 1985 there have been a number of further government decrees aimed at strengthening the policies towards structural adjustment. These include the creation of the Fondo Social de Emergencia (Emergency Social Fund, FSE) in December 1986, and the Economic Reactivation decree (July 1987). The discussion below is based on Morales,6 Morales and Sachs,7 and unpublished World Bank documents.

The NPE included reforms in a number of important areas, including the foreign exchange market, fiscal policy, tariff structure, external financing, public enterprises, and liberalization in three important markets, namely for goods, finance, and labour. These reforms are discussed here in turn.

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The reforms in the foreign exchange market have been held to be very important in controlling inflation. The years of very rapid inflation had led to domestic prices being set in US dollar terms, and then converted to domestic currency using the spot exchange rate. The exchange rate was sharply devalued to a more realistic rate, and has been since determined by auctions every working day. There is almost no difference from the parallel market rate. The foreign exchange market has also been liberalized. Morales8 argues that the latter development played an important role in "destrangulation" of the external sector: it encouraged the repatriation of at least some of the private capital flight from the preceeding years, and additionally the government whitewashed the dollars from the clandestine economy.

Control of fiscal and monetary policy is held to be the other crucial component of successful stabilization.9 Since there is no bond market, the fiscal deficit automatically leads to monetary expansion unless there is foreign financing. Following the inauguration of the NPE the government moved to control public expenditure and to raise taxes. Public expenditure cuts were achieved primarily by shedding employment. The mining parastatal (Comibol) suffered the largest cuts (the labour force dwindled from 30,000 in 1985 to 7,000 in 1987), and there were also cuts in the hydrocarbon parastatal (YFPB). Public employment in total (including the two parastatals previously mentioned) fell by 58,815 between 1985 and 1987, 10 a fall of about 25 percent (using figures on total public sector employment from Klinov).11 On the income side the government obtained immediate revenue from raising the price of hydrocarbons to world levels (a price rise of a factor of 10), and by collecting back taxes from the mining and hydrocarbon parastatals, which had had an incentive to delay payment during the hyperinflation. More long run reforms included a national value added tax of 10 percent, implemented in 1986, reforms of personal taxes, and a land tax implemented (despite opposition) in 1988 which for the first time requires campesinos to pay direct taxes.

Restructuring of incentives for trade is a frequent component of structural adjustment plans. The NPE abolished prohibitions and licensing requirements which applied to imports, and set tariffs initially at a rate of 10 percent, plus 10 percent of the previous tariff, which was replaced in 1986 by a uniform tariff of 20 percent on almost all items.

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External finance is usually important to ease the transition to stabilization and structural adjustment. In 1985, Bolivia was in arrears to all creditors (although the arrears to multilateral agencies were relatively small), and in default to some. Since then the country has become current on payments to multilateral creditors, rescheduled payments to bilateral government creditors, and has tried to negotiate relief on commercial debt. Being a small country, and moreover the second poorest in the region, Bolivia has tended to receive fairly high levels of aid per capita. Although the NPE received only fairly modest external support, the Emergency Social Fund was a channel for sizeable additional amounts of aid.

The reform of the public sector, and the dismantling of much of the

system put in place since the 1952 Revolution, was a far-reaching change. The employment cuts have already been mentioned above. The government also stepped back from its involvement in most

parastatals (retaining Comibol and YPFB). The holdings of the Bolivia Development Corporation were dissolved and transferred to regional development corporations, to municipalities, and in some cases pri- vatized or made into co-operatives. The aim was to promote the

private sector, and the ensuing policy debate has emphasized promotion of small scale enterprise.12

Finally, the NPE included provisions for liberalization in various

important markets. In the goods market, the government removed price controls, which had been particularly important in the

agricultural sector. Prices of public services were raised using neighbouring country levels as guidelines, and trucking was deregulated. In the finance market, interest rates were freed, and controls on financial contracts were reduced. However the banks remain weak due to the aftermath of the hyperinflation, and real interest rates are still high. This tends to conflict with aims to encourage the private and small scale sector.

A number of far-reaching changes were made in the labour market (described in Donoso13). In addition to public sector labour shedding, the private sector was allowed to rescind work contracts freely. These had previously had unlimited duration, and any worker hired for lon-

ger than a certain period of time became permanent. In an attempt to

mitigate some of the effects of labour shakeout, a temporary relocali- zation benefit for fired workers was instituted. Another important change was the consolidation of the wage structure. Since 1971, gov- ernments had granted large numbers of bonuses, such that the wage actually paid and the base wage bore very little relation to each other.

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In the period November 1982 to March 1983 the number of bonuses paid in annual income (in addition to base salary) ranged from 4 in agriculture to 44 in manufacturing14 (a bonus is usually the equivalent of a month's salary). The previous government had already tried to consolidate wages, but unions persisted in renegotiating the bonuses. After 1985, only overtime and Christmas bonuses remained. The government also stepped out of private sector wage negotiation, leaving it between the employer and employee (or union), whereas previously there had been national negotiations between the government and the unions. Public sector wage scales were regulated so as not to exceed a certain multiple of the minimum wage. Unlike some of the other stabilization plans in Latin America, there was no need to de-index wages, since formal indexation had not been especially important in Bolivia. Although the minimum wage had been indexed between November 1982 and February 1985, as had the basic wage between April 1984 and August 1985, this had mainly affected some social benefits such as pensions, and direct bargaining between the unions and government had been more important in the wage-setting process.

Following the NPE, a number of other decrees were aimed further at structural adjustment. The FSE was set up as a temporary special employment creation measure. This was partly motivated by the observed rise in unemployment, the increase in the share of the unemployed with previous job experience and the corresponding decline in the share of new job market entrants, and the larger share of heads of household in the unemployed.15 The decree aimed to set up a temporary (2 year) program for immediately implementable pro- jects mainly in the large cities and in mining areas. (The program was subsequently extended, but was scheduled to wind down by the end of 1990). It was hoped that the program would halve the unemployment rate. There were three subprograms, in infrastructure, housing, and small enterprises, of which the first one has been the most important.

In 1987, the Economic Reactivation decree was issued, laying out policies for the reactivation of the economy. The decree was a three- year plan which aimed to increase employment, increase the growth and diversification of exports, raise domestic production behind low and uniform tariffs, enhance the availability and reduce the cost of credit to the private sector, settle the payment schedule on outstanding external commercial bank credit, and increase the supply of housing. A number of tools were to be used to achieve these ends,

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including a public investment program (in conjunction whith the FSE), a fund for private sector credit, a tax rebate for exports (5 percent on traditional exports, 10 percent on non-traditional), changes in banking regulations (e.g. some limits on lending, restructuring of the three state banks), a debt swap arrangement for outstanding external commercial bank debt using aid money), and creation of some new institutions in the areas of housing, export promotion, and the National Council for Social Policy with representation from different major social groups. The new government in 1989 has also issued policy statements concerning structural change, similar to those of the preceding government.

It is as yet relatively early to assess the effects of the adjustment program. The stabilization part of the package was immediately successful. Inflation halted within a week or so, 16 and has since remained at 10-14 percent per annum, one of the lowest rates in Latin America. The Emergency Social Fund has been relatively successful at reaching its employment targets, if rather slow to begin. By December 1987 it still employed less than 10,000 people in a given month, although by June 1988 the figure had risen to a monthly number of 20,000 (unpublished figures, FSE). This compares to an estimated number of unemployed of 110,000 in the 9 department capitals in 1988. 17 It was also relatively successful in targeting poorer individuals.18

However the reactivation measures have had less immediate success. Although GNP began to rise again in 1987 and 1988, the recovery has been as yet relatively weak (it was largely concentrated in construction and manufacturing), and a number of problems remain. The trade balance has worsened since 1985 despite the devaluation, although estimates suggest that coca exports more than compensate. The labour market statistics from 1988 and 1989 are wor- risome. There is also concern that the Paz Zamora government may be finding it difficult to maintain tight fiscal control.

A number of important obstacles remain in the path of successful adjustment. Firstly, some analysts argue that the exchange rate is now overvalued, causing Bolivian labour costs to be high relative to those in surrounding countries. One possible cause of this is a "Dutch disease" effect due to drug exports, and possibly repatriation of some of the funds from capital flight during the inflationary years, which are fueling the construction boom. The narcotics trade exerts an unmeasurable but large effect on the economy (unofficial US AID estimates for 1988 place coca exports at 56-57 percent of the value of

legitimate merchandise exports, and 6.0-9.3 percent of GDP in direct effects).

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Another problem for the trade sector is that the Bolivian free foreign exchange market has been used by people from neighbouring countries with foreign exchange controls and where the official exchange rates are overvalued. There is an incentive to smuggle consumer goods to Bolivia from Brazil, Chile and Peru in order to obtain Bolivianos to exchange at favourable rates for dollars. It is somewhat tempting to compare the current Bolivian set of policies with the dis- astrous Southern Cone experiments to simultaneously liberalize current and capital accounts in the late 1970's.

Another area of concern is the financial market. Banks remain in difficulties, and the tight monetary policy exacerbates the problem of already scarce and expensive credit to the private sector. New institutions created as part of the structural adjustment measures have been slow to commence activities. Additional external finance in support of adjustment has also been rather limited although there was a modestly successful debt buyback operation.

A further dampening factor in domestic demand has been the dramatic falls in real wages (documented below). Bolivia may fit into the category of "stagnationist" models as discussed by Taylor19 and others.

To some extent evaluation of the structural adjustment policies will have to await further developments. However the political costs of the measures undertaken are not trivial (there have been marches on the capital, arrested by tanks, numerous marches of campesinos in the capital, strikes and blockades by groups such as teachers, etc.). Some early indications of recovery are therefore important in order to maintain political support for the measures.

Bolivia's Adjustment Experience: Comparison with 11 Other Coun- tries. Bolivia's macro problems seem to have been more persistent than for many other developing countries, and its adjustment path more pain- ful, as tables 1-3 document. Although falls in GDP were not uncommon in developing countries, particularly around 1980-82 (table 1), Bolivia has had the longest period of negative growth in the 12 countries in the table. Between 1978-9 and 1985-6, there was only one year with positive GDP growth. Horton, Kanbur and Mazumdar20 categorize the 12 countries in table 1 into four groups of three, namely those undertaking "severe adjustment" (Chile, Bolivia and Ghana), those with successful adjustment (the three Asian countries), those with partial adjustment (Brazil, Costa Rica and Kenya), and those who either had not begun to adjust (Egypt) or whose attempts at adjustment were frustrated (Argentina, Cote d'Ivoire).

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Table 1

Growth rates of GDP (constant prices)

Year

County 70-1 71-2 72-3 73-4 74-5 75-6 76-7 77-8 78-979-80 80-1 81-2 82-3 83-4 84-5 85-6 86-7 87-8

Argentina 3.4 1.9 3.2 6.3 -0.7 -0.2 6.4 -3.2 7.0 1.5 -6.7 4.9 3.0 2.6 4.5 55 2.0 -

Bolivia 4.9 5.8 6.7 5.1 6.6 6.1 4.2 3.4 0.0 -0.6 0.9 4.9 -6.5 -0.3 -0.2 -2.9 2.2 2.8

Brazil 12.3 10.9 13.5 9.7 9.9 9.7 2.9 4.9 6.8 9.3 4.4 0.6 -3.5 5.1 8.3 7.6 3.6 -0.3

Chile 9.0 -1.2 -5.6 0.1-12.9 3.5 9.9 8.3 8.3 7.8 5.5-14.1 -0.1 6.3 2.4 5.7 5.7 -

Costa Rica 6.8 8.2 7.7 5.5 2.1 5.5 8.9 6.3 4.9 0.8 -2.3 -7.3 2.9 8.0 0.7 5.5 5.4 2.9

C d'Ivoire 12.0 4.7 9.9 5.2 6.3 1.4 3.0 0.0 -8.9 - - - -

Egypt - - 0.8 2.7 9.1 15.3 13.5 5.9 6.2 10.3 3.8 10.1 7.6 6.2 6.7 2.7 2.5 3.2

Ghana 5.6 -2.5 15.3 3.4-12.9 3.5 2.3 8.5 -3.2 0.0 -1.8 -7.2 0.2 2.6 5.1 5.2 4.8 -

Kenya 6.9 9.5 6.8 1.5 3.4 7.0 9.4 9.0 3.8 5.6 3.7 0.6 2.7 2.0 3.8 5.2 5.8 -

Korea 9.2 5.9 5.4 14.4 7.9 6.5 13.2 10.9 9.7 7.4 9.8 6.7 7.3 11.8 9.4 6.9 12.4 -

Malaysia 7.1 9.4 11.7 8.3 0.8 11.6 7.8 6.7 9.3 7.4 6.9 5.9 6.3 7.8 9.9 1.2 5.2 8.1

Thailand - 5.0 4.1 9.8 4.8 9.4 9.9 10.4 5.3 4.8 6.3 4.1 7.3 7.1 3.5 5.0 7.1 -

Sources: Calculated from IMF International Financial Statistics, various years (except Bolivia data from country study).

Table 1 shows that the Asian countries have had occasional less successful years, but in general exhibit growth rates of 5 percent per annum or greater, and no years of negative growth. Of the "severe adjustment" countries, Chile and Ghana exhibit economic problems dating back to the 1970's, with large negative growth of GDP in some years, but since 1983 each country has grown at close to or more than 5 percent in three of the following years. Bolivia's economic problems began later but also persisted longer. The three "partial adjustment" countries appear to resume reasonable growth rates of GDP after the worst years, although their year-to-date growth fluctuates thereafter. Finally the "frustrated adjustment" cases exhibit somewhat hetero- geneous behavior: there are stop-and-go cycles in Argentina, Egypt (as an oil exporter) only began to run into problems in 1985, and Cote d'Ivoire was restricted in its ability to adjust, by its inability to devalue effectively.

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Table 2 Unemployment rates

Year

Country 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989

Argentina .... 4.2 3.4 4.8 3.3 3.3 2.5 2.5 4.8 5.3 4.7 4.6 6.1 5.2 5.6 6.1 • Bolivia 7.5 6.2 7.5 8.2 6.6 5.7 4.2 5.9 11.5 10.7 Brazil 6.8 6.4 6.3 7.9 6.3 6.7 7.1 5.3 3.6 3.8 • - Chile 17.4 16.9 17.9 17.0 15.0 25.0 26.2 21.4 19.0 13.6 10.9 7.2 ■ • Costa Rica ...... 6.2 4.6 4.5 4.9 5.9 8.8 9.4 9.0 - 6.9 5.9 5.6 5.5 - C d'Ivoire 2.5 - - - - 2.8 2.5 •• •

Egypt - - -8.8 10.7 - - 11.3 .... Ghana Kenya 6.1 6.9 - - - Korea 4.5 4.5 4.5 4.0 4.1 4.1 3.9 3.8 3.2 3.8 5.2 4.5 4.3 4.1 3.8 4.0 3.8 3.1 2.5 -

Malaysia 7.6 • • - 6.7 • • • 6.3 5.7 5.7 5.0 4.7 5.5 6.3 7.6 8.5 8.2 - • Thailand 0.4 0.8 0.8 0.7 0.9 0.9 0.9 3.6 1.9 2.3 2.7 3.5 5.8 • •

Sources: Horton, Kanbur and Mazumdar30

This categorization of the countries according to adjustment experience is useful for analyzing labor market outcomes, such as the level of unemployment and the real wage. As table 2 shows, unemployment rates have fluctuated cyclically in most countries. However the lack of unemployment insurance has prevented a trend increase in unemployment, and weak labor demand has translated into other forms (such as underemployment, falling participation rates and informalization). Open unemployment in Bolivia was particularly high in 1988-9. Chile was the only other country where open unemployment exceeded 10 percent, although the Chilean case is by far the most extreme in the table. There are no data on unemployment rates in Ghana, the other "severe adjustment" country.

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Table 3 Real wages indices (1980=100)

Year

Country 1970 1971 1972 1973 1974 1975 1976 1977 197! 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988

Argentina log 112 105 115 129 124 80 74 77 86 100 91 80 97 106 87 82 72 • Bolivia 100 114 113 118 94 86 98 107 108 110 100 80 564 "42 36 55 34 42 - Brazil 79 • - 84 85 89 94 95 100 109 122 113 105 113 122 106 • Chile 112 118 104 58 56 63 72 82 91 100 100 114 133 95 89 76 73 71 - Costa Ricad 80 96 97 105 100 85 63 77 - 92 95 • • Costa Ricae 100 84 65 77 - 93 97 - - C d'Ivoire . 100 - - - - 115 -

Egypt® . . - 89 92 73 79 92 89 105 100 103 104 108 118 120 103 91 -

Egypt" . - - 93 96 86 88 109 100 103 100 105 108 104 108 101 92 84 •

Egypt0 . - - 125 109 104 105 104 103 103 100 108 109 98 96 89 75 69 - Ghana . . - 113 93 100 59 53 41 60 87 141 - -

Kenya .... Korea 44 45 46 53 57 58 68 82 96 105 100 99 106 115 122 130 139 150 168 Malaysia 83 83 80 71 76 80 85 87 89 95 100 106 111 118 125 135 133 130 127

Notes: a private sector b public enterprises c government d paid workers (employees) e all workers * denotes household survey data: otherwise employment and earnings *** denotes possible break in series

Sources: Horton, Kanbur and Mazumdar31

Even more than unemployment rates, the "severe adjustment" countries are distinguished by their real wage trends (table 3), which decline by 50 percent or more as compared to earlier levels, in Chile, Ghana and Bolivia. Real wage declines do occur in the other countries, but are less severe. Real wages have subsequently recovered in most countries, but the recovery is particularly weak in Bolivia. The data have to be interpreted cautiously since they are not available for all 12 countries, and in some cases are not household

survey data (formal sector wage data likely understate the decline in real wages). Nevertheless the data are suggestive as to the political reasons for opposition to the types of severe adjustment undertaken in Chile, Bolivia and Ghana.

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Thus Bolivia's macro and labor market experience are somewhat unusually severe, even as compared to other developing countries. The next section analyzes further some of the changes in the Bolivian larbor market.

Stabilization and Structural Adjustment and the Labour market. There are relatively few studies on the adjustments in the labor market in Bolivia in the late 1970s and 1980s. Some information is pro- vided in Afcha et al,21 CET,22 INE and UDAPE23 and Morales.24 Tables 4-10 here are collated by the author from existing data sources, or ta- bulated by the author from the labor force surveys (EPH). There are almost no rural data prior to 1991, except for the Censuses (1900, 1950 and 1974). The two main sources for the urban labor market are the labor force surveys (Encuesta Permanente de Hogares - EPH) conduc- ted by the Instituto Nacional de Estadística (National Statistical Insti- tute: INE), and aggregate data for the formal sector collected by the Ministry of Labor.

These data have to be interpreted with some caution. The Ministry of Labour data are based on information supplied by different sectors, and the coverage of the informal sector is particularly weak. Hence their unemployment data (which show a large increase in the 1980s) are particularly suspect, since much of the so-called unemployment arguably represents a shift into informal sector activities which the Ministry simply misses. Similarly the Ministry series on real wages is highly suspect after 1985: since the Ministry collects mainly basic salary data (excluding bonuses), the incorporation of the bonuses into the basic salary in 1985, means that the Ministry data tend to underestimate the fall in real wages.

The household surveys seem to be more reliable on unemployment and wages, but also have a couple of disadvantages. One is that the surveys took place at different times of year and hence there is a possible unmeasurable seasonal effect. Another is that the data only go back to 1980. There were some employment surveys for 1976-79, but these are not comparable to the EPH which began in 1980. They also have a loose definition of employment, including anyone who worked more than one hour per week.

It is important to try to separate two sets of factors, namely the usual cyclical effects on the labour market (1982-83 being years of recession when GDP fell over 11 percent), and trend changes following stabilization and structural adjustment policies beginning in 1985. However it is not easy to separate these events, especially since the data series are only available for a relatively short span of years.

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Table 4 Labour market indicators, urban centres

Variable 1980 1981 1982 1983 1984 1985 1986 1987 1988 7 cities (department capitals)

1. Population >10 years 1321 1363 1416 1470 1626 1686 - 1830 1977 eje central (4 cities)

2. Population >10 years 1155 11% 1246 1279 1454 1501 1535 1625 1730 3. Participation rate 51.2 49.6 41.8 44.8 49.7 44.8 47.1 46.3 48.9 4. Unemployment rate 7.5 6.2 7.5 8.2 6.6 5.7 4.2 5.9 11.5 5. Underemployment rate 9.0 - 4.8 3.4 4.2 2.0 2.2 3.5 7.0 6. % of job leavers in 62.9 68.6 - 67.6 67.1 50.6 49.3 56.6 76.2

unemployed 7. % of employed salaried 58.4 58.9 58.9 58.2 53.8 56.9 57.5 53.8 54.3 8. Hours worked per week 44.6 - 42.0 - 44.6 - 44.1 44.8 44.5

Sources: 1-7: INE32 and INE33: 7 cities include all department capitals except Trinidad and Cobija. 8: Author's calculations from tabulations by INE from EPH.

Note: Participation rate is the ratio of the economically active population to the population aged over 10 years. "Job leavers" ( cesantes ) are those who have previously held a job: 1-fraction of job leavers equals the fraction of new entrants to the labour force ( aspirantes ). Underemployment is all those working 12 hours or less (INE 's definition).

The figures in table 4 suggest that mainly cyclical factors were at work in affecting participation and unemployment rates. In the recession years (1982-83) participation rates fell (discouraged worker effect), unemployment rates peaked, the percentage of unemployed who had previously worked increased, and hours worked per week fell. It is difficult to detect an effect of stabilization or structural adjustment on these labour market variables, at least up until 1987. The only discernible trend to 1987 is in the decrease in the percentage of salaried employment. Thus despite economic stagnation, there was apparently no rise in unemployment. It will be argued here that what happened was a trend towards increased informalization and marginalization of the labour force. Bolivia is too poor a country for open unemployment to persist over time. The informalization thesis is discussed and documented in more detail below. However several

57



of the labour market indicators worsened in 1988 and 1989 (unemployment, underemployment, share of job leavers in the unemployed), despite the resumption of positive growth. This merits close watch in case it represents a delayed response to the structural adjustment measures.

It is interesting to speculate on the role of the FSE in alleviating unemployment. The Fund was first suggested in 1985, 25 at a time when the 1982-83 unemployment data were becoming available. At that time unemployment was rising, and the percentage of job leavers and of heads of household amongst the unemployed was increasing. At the same time the labour market measures included in the structural adjustment decrees were anticipated to create further unemployment. However the Fund did not become very significant in terms of job creation until June 1987 or the beginning of 1988. Thus the Fund did not have much effect on employment until then.

TABLE 5 Sectoral Composition of Employment, 1970-86

Sector 1970 1976 1980 1986 Agriculture 50.6 48.1 46.5 49.9 Mining 4.0 3.3 4.0 3.1 Hydrocarbons 0.3 0.3 0.4 0.5 Manufacturing 9.7 10.1 10.3 8.9 Construction 3.7 5.7 5.5 2.6 Utilities 0.2 0.2 0.4 0.5 Transport 4.0 3.9 5.4 5.6 Commerce 7.2 7.4 7.4 8.2 Finance 0.6 0.6 0.6 0.8 Services 19.7 19.6 19.3 20.0

Tradeables 64.6 61.8 61.2 62.4 Non-tradeables 35.4 37.4 38.6 37.2

Total 100.0 100.0 100.0 100.0

Source: Ministry of Labour (unpublished tables), collected from sectoral sources. Tradeables include agriculture, mining, hydrocarbons and manufacturing. All other sectors are included in non-tradeables.

Table 5 shows some disturbing trends in sectoral employment. Over the period 1970-80 the sectoral shifts were of the kind usually associated with economic development, namely a shift out of agricul-

58



ture and into industry. This trend was abruptly reversed in the 1980s, with a shift back out of industry into agriculture and into commerce and services. The latter development is of concern if there is crowding of displaced workers in relatively low productivity and low remuner- ation activities. Another way of interpreting these data is to group sectors into tradeables (agriculture, mining, hydrocarbons and manufacturing), and non-tradeables (all other sectors). This is an extremely crude classification, but is the best feasible with existing data. On this basis, it is seen that Bolivia's inward-oriented economic policies prior to 1980 were associated with a continuous shift out of tradeables. Thereafter the trend was reversed. However, coca production may also be responsible for the increased agriculture and hence tradeables share.

TABLE 6 Urban Real Wages by Sector, 1970-1984

Sector 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1970=100

Mining 100 102 100 102 82 79 83 81 76 78 76 - - - -

Hydrocar- bons 100 102 100 102 82 142 189 209 263 248 249 - - - - Manufactur- ing 100 113 114 123 99 98 114 111 111 114 102 - - - - Construction 100 119 116 109 97 90 109 115 115 131 121 - - - - Utilities 100 87 82 85 69 91 92 93 97 84 84 - - - -

Transport 100 104 102 122 96 96 102 112 120 120 120 - - - - Commerce 100 108 105 117 83 79 101 107 114 110 91 - - - - Finance 100 98 94 73 46 43 42 53 60 59 53 - - - - Services 100 102 100 104 87 70 76 92 89 84 80 - - - - Total 100 114 113 118 94 86 98 107 108 110 100 80 56 47 45

Source: Delons and Bour34 from unpublished Ministry of Labour data for indices 1970-1980. Muller and Machicado35 for indices 1981-84. Both indices are based on Ministry of .abour (CON ALS A) data.

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TABLE 7 Urban Real Wages by Sector, 1982-88

Ministry of Labour data INE data March 1982=100 1982=100

Dec Dec Dec Dec Dec Sector 1982 1983 1984 1985 1986 1986 1987 1988 Mining 161.8 76.7 117.4 110.0 99.7 Hydrocarbons 74.4 48.5 199.8 66.0 66.4 76-0 68 3 55,6

Manufact'g 81.3 113.6 136.3 51.8 58.5 52.5 42.9 31.9 Construct. 51.5 47.3 92.5 51.9 73.5 101.9 84.7 76.7 Utilities 82.9 43.1 88.9 47.0 74.3 64.5 63.9 68.0 Transport 56.7 44.8 55.8 68.5 57.9 89.2 71.2 59.0 Commerce 69.0 56.9 76.4 48.2 62.5 43.5 43.8 23.5 Financial 89.8 65.9 108.9 95.1 129.5 69.4 64.7 47.6 Services 63.4 57.1 103.6 47.5 72.1 Public admin. 51.9 45.8 64.8 46.0 32.7 69 3 27-9 50-5

Tradeables 55.5 46.6 33.8 Nontradeables 66.8 44.1 44.5

Total 75.2 63.4 99.1 60.4 74.2 58.8 51.8 38.7

Source: Ministry data: Afcha et al36; INE data: 1986-7: from author's calculations from INE tabulations from EPH, deflated by consumer price index of June of year; 1988 data: author's tabulations from EPH. INE data are for eje central only. Tradeables include manufacturing, hydrocarbons and mining.

Tables 6 and 7 present data on real wages. The data for the hyperinflation years 1984 and 1985 are particularly unreliable: the real wage data tend to bounce around substantially in these two years, depending on when a particular sector received a pay rise, in relation to the month in which the data were collected. Therefore apparent sectoral differences in 1984 and 1985 should not be ascribed undue significance. The pre- and post-hyperinflation data are however more reliable.

The overall net effect of the 1970-1980 decade was of no change in real wages: the gains up to 1978 were eroded with the onset of the economic crisis (1973-4 posted a downward blip in the otherwise

60



generally rising trend of real wages up to 1978). There were some sectoral differences: the hydrocarbon sector did well, and commerce and services relatively badly.

In the early 1980s real wages began to fall substantially. Using the

Ministry of Labour data, and assuming that the Muller and Machicado index for 1981 represents a point near to the end of the

year and can be linked to the March 1982 base for table 7, then at a conservative estimate real wages fell by 20 percent of their 1980 value

by the end of 1981, and by a further 25 percent of their March 1982 value by December 1986. Therefore, by 1986 real wages were around 59 percent of their 1980 (and hence also 1970) value. These represent mainly formal sector wages. If instead we use the INE series for the

period 1982-86 (and arguably this is better, due to the break in the

Ministry series due to the consolidation of the salary structure in

1985), then real wages in 1986 were 52 percent of their 1982 value, and thus 41 percent or less of their value in 1980 (and hence also 1970). The INE series covers both formal and informal sector wages. Thus there were substantial falls in real wages, which apparently far exceeded the fall in per capita GDP over the same period (the latter was around 73 percent of its 1980 value by 1986).

Both the Ministry and INE series give similar sectoral patterns of

change in real wages. The sectors which did worst were manufactur-

ing, transport, public administration, and (according to INE) commerce. Manufacturing obviously suffered from the fall in tariff

protection, transport from deregulation, and public administration from the drastic labour shedding. The explanation for commerce is most likely the "crowding" one, namely that there were shifts into the relatively unremuner ative sectors such as petty commerce, i.e. the marginalization/informalization view discussed earlier. If we calculate a rather crude index for real wages in tradeable and non-tradeable sectors separately, it can be seen that the tradeable sector did

consistently worse over the period 1982-88. Note however that there is no wage series for the agricultural sector, the one tradeable sector which was gaining in employment share. But the data do suggest that the shift in incentives for manufacturing, due to the change in the ex-

change rate, was not large enough to offset the adverse effects of de- creased protection for this sector.

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TABLE 8 Informal Sector as % of Urban Employment by Sector,

Selected Years 1980-88 and Informal Sector Median Earnings as % Formal Sector Median

Sector 1982 1983 1984 1985 .... 1988 Employment

Share of employment in informal sector, by economic sector Mining 16.1 - 9.3 - 20.6 Manufacturing 59.2 - 66.7 - 68.2 Construction 61.4 - 63.5 - 56.1 Utilities 6.8 - 14.8 - 8.7 Transport 70.8 - 67.7 - 70.3 Commerce 83.6 - 90.6 - 89.9 Finance 40.9 - 29.1 - 40.7 Services 45.5 - 42.8 - 46.4

Total 56.9 61.1 60.5 56.3 64.3

Median earnings informal as %

formal 54.3 - 69.3 80.0 60.0

Source: 1980-85: INE and UDAPE37: 8 cities (department capitals excluding Cobija). 1988: author's calculations from EPH 1988: 4 cities (eje central) Note: Informal sector is defined as in text: includes workers on own account (excluding professionals), domestic employees, and employees, employers and unpaid family workers in establishments with less than 5 workers.

Includes cities of eje central only for 1988, whereas other years are 8 cities (all department capitals excluding Cobija). Earnings are for primary occupation only.

Table 8 provides some information on the formal and informal sectors. The definition adopted here is that of INE and UDAPE,26 namely that the informal sector includes workers on own account (excluding professionals), domestic employees, and any of the following working in establishments of 5 or less workers: employees, unpaid family workers, and employers. The formal sector includes those working in establishments of 6 or more (i.e. employees, unpaid family workers, and employers), plus professionals. (Data are not presented for 1980 and 1981 since the data needed to calculate the size of informal sector were not collected on the same basis as for later years.)

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The data suggest that there has been a general increase in informalization over time, particularly in manufacturing and commerce, although there are also year-to-year fluctuations. This would be corroborated by Casanovas' observation that the number of own account workers has risen much faster than the size of the labour force, during the 1980's. Casanovas estimates that the informal sector in La Paz increased from 47 percent of employment in 1976, to 53 percent in 1980 and 58 percent in 1984. 27 We can combine this information with INE and UDAPE's findings28 that the median size of informal sector establishments actually fell over the 1980s (from 2.06 workers in 1982 to 1.75 in 1985), whereas at the same time the median size of formal sector establishments (excluding public sector ones) increased from 13 in 1983 to 40.9 in 1985. One interpretation is therefore that there was increased concentration in the formal sector, as smaller formal sector establishments went out of business and people shifted into the informal sector, particularly into unipersonal enterprises.

There is also more anecdotal evidence on the shift from formal to informal sector, and in particular into petty-commerce type activities. The mechanism for worker dismissal often encouraged such a shift: the miners in particular (and some other public employees who were dismissed) were eligible for fairly large severance payments (extending up to two or three years wages for miners). In some cases these payments were made in dollars. Apparently a number of those dismissed used these severance payments to purchase imported consumer goods, and thus set themselves up in trade and commerce. CET29 examines survey data on the sector in which those losing public sector employment located themselves, and concludes that there was a substantial shift to the informal sector.

Figures on formal versus informal sector earnings (also in table 8) suggest that informal sector earnings tended to rise relative to formal sector ones during the hyperinflation (it would not be surprising that those on fixed wages and salaries would tend to lose out during very rapid inflation), but dropped back again by 1988. Unfortunately there are no data preceding the worst recession years of 1982-3 (the weights for 1981, the first year in which income data were collected, are not available from INE).

Thus the available evidence suggests a pattern of labour market adjustment during economic crisis, with as yet little substantial recovery and successful resumption of economic growth. The consequence of

prolonged stagnation (and very severe recession in 1982-3) was not a large increase in open unemployment (at least until 1988), but instead

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of a fall in participation rates, a fall in the proportion of salaried employment, increasing informatization of economic activity, and a reversal of the sectoral shifts which usually accompany economic development. However on a more optimistic basis there seemed to be a reversal of the past trends in which labour had consistently shifted out of tradeables. Displaced labour from the formal sector has moved to own account activities, to one-person establishments, and frequently into petty commerce activities. Evidence does not suggest that the labour market is rigid and impeded adjustment: the sectoral shifts and changes in size of establishment were significant. Also the fall in the real wage (of the order of 60 percent between 1980 and 1988) was very substantial, and far exceeded the fall in real per capita GDP (around 27 percent over the same period). The decline in real wages is particularly important in a relatively poor country such as Bolivia.

TABLE 9 Labour Force Indicators by City, 1980-1987

(1) (2) (3) (4) (5) (6) City Population Participation Unemployment % salaried %in mean monthly

> 10 COOO) rate (%) rate (%) informal earnings, as % sector of mean for

eje central

1980 1987 1980 1987 1980 1987 1980 1987 1988 1981 1988 Total (7 cities) 1321 1830 49.8 46.3 7.3 9.2 59.3 54.3 65.0* 100.0* 100.0*

La Paz 600 789 54.8 49.6 9.6 11.9 56.9 54.2 70.4 (81.7) 66.4 Cochabamba 193 264 47.4 42.5 7.4 4.8 57.8 56.4 57.6 (104.0) 123.3 Santa Cruz 250 430 48.0 48.4 2.0 5.3 63.4 53.1 62.6 (136.2) 143.7 Oruro 112. 143 45.0 35.7 7.5 16.7 56.5 47.1 61.0 (82.5) 80.3 Sucre 58 69 41.3 41.7 11.3 8.2 65.6 60.7 - Potosí 69 83 34.7 38.0 1.2 9.1 70.4 60.5 -

Tanja 39 53 48.5 47.6 4.9 5.1 63.4 55.8 Trinidad 23 - 42.6 - 1.3 - 69.7 - - - -

Source: (1), (2), (3), (4): INE38 (5), (6): author's tabulations using EPH 1981 and 1988. Note: 7 cities total includes all cities which are department capitals except Cobija and Trinidad. (Note that capitals have the same names as the corresponding departments, except for Sucre (capital of Chuquisaca), Cobija (Pando) and Trinidad (Beni). * includes only the 4 cities of eje central ( ) 1981 data are unweighted Earnings data are for primary and secondary occupations combined

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As was indicated earlier, structural economic changes in Bolivia frequently imply regional shifts in employment and economic activity. Between 1900 and 1950 the major shifts were towards the altiplano, centre of mining and traditional agricultural activities. Since 1950, and especially since the crisis in minerals, the eastern lowland provin- ces have gained in importance, both for industry and for commercial agriculture. This has important consequences for migration and for political economy. Table 9 provides some information on labour force indicators by city. Larger cities tend to have higher participation rates, as well as a higher percentage of non-salaried employment. Evidently the greater level of overall economic activity in larger centres is better able to support informal sector activities, in which women are more likely to participate. The most prosperous cities of the Eje Central (central axis: term used for the 4 major cities) are Santa Cruz, followed by Cochabamba. The altiplano cities (La Paz and Potosi) have markedly lower levels of earnings per person.

The recession also had different effects on different cities. The highest unemployment rates in 1987 were in the three altiplano cities, i.e. the two worst hit by the problems in mining (Oruro, Potosí), plus La Paz, the immediate destination of most altiplano migrants. Partici- pation rates in 1987 were lowest in the two mining cities (Oruro and Potosí) possibly indicative of discouraged worker effects. Earnings trends suggest that La Paz fared the worst relative to the other cities of the altiplano , again implying substantial immigration to the informal sector in La Paz.

These regional shifts imply some future adjustment problems. The eastern cities are in an area where transport infrastructure is less well

developed, and where costs of exporting are higher. There have also apparently been difficulties in shifting the burden of taxation to the newer economic activities in the east: in the past taxing the nationalized mining sector was arguably easier (notwithstanding the occasional clashes between the mining unions and the government). It is also somewhat unusual to have the capital city located in an area of declining economic activity (and for Bolivia to have two capital cities-Sucre also has some ceremonial functions- both located in declining areas, is quite unusual).

It has been generally hypothesized that women are especially dis- advantaged during the process of structural adjustment. As more marginal employees, they are more likely to lose their jobs during a recession, at the same time as recession may force more women into the labour market to supplement falling family incomes. A counter-

65



argument would be that women are less likely to be located in the state and formal sectors which are worst hit by structural adjustment.

TABLE 10 Urban labour market indicators by sex, eje central,

selected years 1980-88

Variable. 1980 1981 1982 1983 1984 1985 1986 1987 1988

1. Participation rate - male 67.1 - 58.3 - 61.8 - 58.0 59.6 58.6 - female 35.7 - 26.9 - 38.6 - 32.8 35.2 40.0

2. Unemployment rate - male 6.4 - 9.0 - 7.8 - 5.6 6.6 11.5 - female 6.2 - 5.5 - 4.9 - 1.9 4.6 11.5

3. Underemployment rate - male 7.5 - 4.4 - 2.7 - 1.5 2.4 5.1 - female 11.6 - 5.5 - 6.4 - 3.3 5.3 9.5

4. % salaried • -male 66.1 - 60.3 - 59.8 - 60.4 57.6 60.2

-female 46.7 - 56.5 - 45.0 - 47.4 47.7 46.4

5. Male earnings as % - (205.0) 108.0 - 169.9 - 169.7 175.2 199.7

6. % femalini^seclor - mining + hydrocarbons 4.9 18.4

- manufacturing 32.5 31.5 - construction 2.0 - - 8.9 - utilities 18.9 2.5 - transport 6.6 7.1 - commerce 66.3 - 65.6 - finance 28.9 - 21.6 - services 42.8 - 45.6

- formal - - - 25.0 - informal - - 49.4

- total 42.8

Source: 1980,82,84,86,87: tabulations by INE from EPH 1981,88: author's tabulations from EPH (note: 1981 data are unweighted)

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Table 10 provides some information on labour market rates for men and women separately. Female participation rates tend to be lower than for men, but unlike the rates for men, have not tended to decline over time. Possibly Bolivia is following (belatedly) the secular trend elsewhere in Latin America for increased female labour force participation: possibly also the hyperinflation led to increased participation of secondary income earners in order to make ends meet. Female unemployment rates tend to be higher then for men. The latter might be in line with the "luxury unemployment" view, i.e. that secondary family workers are more readily able to afford to be unemployed (tabulations by the author confirm that unemployment rates are also higher amongst the educated, and amongst household members other than the head of household: available on request). Women work on average somewhat shorter hours than men, but this may re- flect the choice of part-time work by a fraction of female workers: women are over-represented in family businesses and domestic service, where hours are very long. A smaller fraction of women than men are salaried, but unlike men there was not a substantial fall in the

proportion salaried between 1980 and 1988 (for men the fall in salaried employment was about 8 percentage points, whereas there was no such fall for women). For the relative male-female earnings differential there is little evidence of change over time (the 1982 data are an outlier and there is perhaps some problem with them). The sectoral concentration of women is quite marked: the sectors which are most heavily female are commerce, services and manufacturing. Women account for half of informal sector but only a quarter of formal sector employment. The latter sectoral distribution explains in

large part the much lower average wages of women.

Conclusions Previous economic studies of Bolivia have tended to focus on the macroeconomic aspects. Bolivia's economic crisis had a rather earlier onset than for other Latin countries (in 1978), although it took 7 years for stabilization to be successfully implemented, and ensuing structural adjustment packages have as yet to yield any considerable benefits in terms of substantial growth, let alone employment and real wage increases. The structural adjustment measures took an almost textbook form: freeing of markets for foreign exchange, foreign capital, trade, finance, goods, and (of most concern here) labour; severe public sector employment cuts and fiscal restructuring.

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Current causes for concern are the high level of real interest rates, the worsening trade and payments balance, sharply rising unemployment in 1988 (providing there is no break in the INE data series), and (at least in this author's opinion) the open capital account. However the size of the illegal (drug) economy makes it important to qualify analysis based solely on reported economic transactions.

The 1980s sequence of prolonged recession, interspersed with hyperinflation, a fairly drastic stabilization, and far-reaching institutional changes designed to encourage structural adjustment, has had large effects on the labour market. Sectoral employment shifts, both out of secondary and into primary and tertiary activities and out of formal and into informal activities, have been large, and in the opposite direction from that usually accompanying economic development. Despite prolonged stagnation there was no trend increase in unemployment, fall in hours worked, or fall in labour force participation rates, although there was a cyclical trough in 1982-3. The labour market adjustment took the form of sectoral shifts, and falls in real wages of 40-50 percent or more since 1980. The government employment creation programme can be given relatively little credit for mopping up surplus labour before 1988. However it may have served a more important role in 1988 and 1989 as unemployment indicators worsened sharply in 1988 despite modest positive GDP growth, perhaps indicating a second round of labour market adjustments due to structural adjustment.

The changes in the labour market have quite large ramifications elsewhere in the economy. The distribution of earned income has worsened (even despite the very short time series for which data are available), losing any improvements which coincided with the hyperinflation. Given that the fall in real wages is about twice the magnitude of the fall in real GDP, the likelihood that overall urban poverty has increased is almost inescapable. However, apparently women were not the big losers that some have theorised to be the case in developing countries undergoing structural adjustment. There has been a wide disparity in the experience of different cities and regions of the country during the economic difficulties. The declining areas (including the capital) have fared badly relative to the newer eastern lowland cities. This in turn has political economy ramifications, as the tax base and location of population also has to shift.

Finally, regarding the prognostications for future growth, thè evidence suggests that the labour market has performed relatively well in adjusting, and that the blame for inadequate recovery lies

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elsewhere, possibly in some macro-policy decisions, but mainly in the lack of external resources to fuel a successful recovery. In fact, it could be argued that the labor market worked too well and the resulting decrease in real wages has led to a stagnationist outcome. Bolivia has followed an almost textbook path in the kinds of adjustment policies adopted. It is to be hoped that growth successfully resumes in the near future, or the social and human costs incurred to achieve these adjustments will not have been worthwhile.

NOTES

1. S. Horton. "Labour Markets in an Era of Adjustment: Bolivia," in Labour Markets in an Era of Adjustment, (S. Horton, R. Kanbur and D. Mazumdar, ed.) Washington D.C: World Bank Economic Development Institute, forthcoming. An earlier version of the present article was presented at the Latin American Studies Assocation meetings, Washington D.C.: April 1991.

2. S. Horton, R. Kanbur and D. Mazumdar. "Overview," in Labour Markets in an Era of Adjustment, (S. Horton, R. Kanbur and D. Mazumdar, eds.) forthcoming.

3. R. Klinov, "Public Sector Wages and Employment in Bolivia," Washington D.C.: World Bank, draft, 1987. (mimeo.)

4. J. A. Morales A., Precios, salarios y politica econòmica durante la alta inflación boliviana de 1982 a 1985, La Paz: ILDIS (Instituto Latinoamericano de Investi- gaciones Sociales), Estudio Diagnostico Debate, 1987.

5. J. A. Morales A. and J. Sachs, "Bolivia's Economic Crisis," in Developing Country Debt and the World Economy, (J. Sachs ed.), Chicago: University of Chicago Press, 1989.

6. J. A. Morales A., Precios, salarios y política económica durante la alta inflación boliviana de 1982 a 1985.

7. J.A. Morales A. and J. Sachs, "Bolivia's Economic Crisis."

8. J.A. Morales A., Precios, salarios y política económica durante la alta inflación boliviana de 1982 a 1985.

9. J.A. Morales A. and J. Sachs, "Bolivia's Economic Crisis."

10. CET (Centro de Estudios del Trabajo), La relocalización, La Paz: CET, Temas Laborales, No. 5, 1988.

11. R. Klinov, "Public Sector Wages and Employment in Bolivia."

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12. J.R. Delons, and J.L. Bour, "Empleo, recursos humanos e ingresos en Bolivia: Una propuesta para la acción," La Paz: UDAPE (Unidad de Análisis de Políticas Económicas), 1988; C.E. Sánchez, "La pequeña y mediana empresa industrial en Bolivia: Un diagnóstico y recomendaciones de política," La Paz: UDAPE (Unidad de Análisis de Políticas Económicas), 1988. (mimeo.)

13. S. Donoso, "Políticas, actividades y estudios sobre empleo," La Paz, UDAPE (Unidad de Análisis de Política Económica), draft, 1988. (mimeo.)

14. A. Mercado, M. Fernández and T. Reinaga, "La relación precios-salarios: el caso boliviano (1982-1985)," La Paz, draft, 1988. (mimeo.)

15. PREALC, "Bases para la formulación de un programa de empleo de emergencia Bolivia 1985-86," Santiago: PREALC, Documento de Trabajo PREALC/321, 1985.

16. J.A. Morales and J. Sachs, "Bolivia's Economic Crisis."

17. Instituto Nacional de Estadística, Encuesta permanente de hogares 1988, La Paz: Ministerio de Planeamiento y Coordinación, 1988.

18. J. Newman, S. Jorgenson and M. Pradhan, "How did workers benefit from Bolivia's Emergency Social Fund?", Washington DC: World Bank Living Standards Measurement Study, Working Paper no. 77, 1991. The fund is also described in more detail in S. Jorgenson, M. Grosh and M. Schachter, "Easing the poor through economic crisis and adjustment: the story of Bolivia's Emergency Social Fund," Washington DC: World Bank, Latin America and the Caribbean Technical Department, Report no. 3, 1991.

19. L. Taylor, Varieties of Stabilization Experiences: Towards Sensible Macroecon- omics in the Third World , Oxford: Çlarendon Press, 1988.

20. S. Horton, R. Kanbur and D. Mazumdar, "Overview."

21. G. Afcha, G. Huarachi, R. Pereira and F. Valverde, "La política de shock antiinflacionario y el mercado de trabajo: el caso boliviano," La Paz: UDAPE (Unidad de Análisis de Políticas Económicas), Borrador para discusión, para ser presentado al Seminario-Taller sobre políticas antiinflacionarias, PREALC, Santiago, Chile, 1988.

22. CET, La relocalización.

23. Instituto Nacional de Estadística (INE) and UDAPE (Unidad de Análisis de Políticas Económicas), "Un intento de medición del sector informal urbano en Bolivia," La Paz: UDAPE, 1987.

24. J.A. Morales A., "Precios, salarios y política económica durante la alta inflación boliviana de 1982 a 1985.

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25. PREALC, ' 'Bases para la formulación de un programa de empleo de emergencia Bolivia 1985-86."

26. INE and UDAPE, "Un intento de medición del sector informal urbano en Bolivia."

27. R. Casanovas S., "El sector familiar en la ciudad de La Paz," in Familia y trabajo en la ciudad Andina, (J.P. Perez S., R. Casanovas S., J. Alvarado, J.C. Ribadeneira and M. Chiriboga, eds.) Quito: Centro Andino de Acción Popular, 1987.


29. CET, La relocalización.



32. INE, Principales resultados de la Encuesta Permanente de Hogares 1980-87, La Paz: Ministerio de Planeamiento y Coordinación, 1980.

33. INE, Encuesta integrada de hogares 1989, La Paz: Ministerio de Planeamiento y Coordinación, 1989.

34. J.R. Delons and J.L. Bour, "Empleo, recursos humanos e ingresos en Bolivia: una propuesta para la acción."

35. Muller and Machicado Asociados, "Características estructurales del empleo y la evolución del salario," La Paz: Muller and Machicado Asociados, informe confidencial, 1986. (mimeo.)

36. G. Afcha, G. Huarachi, R. Pereira and F. Valverde, "La política de shock antiinflacionario y el mercado de trabajo: el caso boliviano."


38. INE, Principales resultados de la Encuesta Permanente de Hogares 1980-87, La Paz: Ministerio de Planeamiento y Coordinación, 1988.

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labour markets and the shock treatment in bolivia

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