The Devil’s in the Dance: Elements of a Growth Diagnostic in Bolivia

Bolivia’s economy stands at a crossroads. Weakened by the fiscal and external imbalances triggered by the 2014 fall in gas prices and exacerbated by the COVID-19 pandemic, the country faces a complex challenge: how to reignite economic growth while restoring macroeconomic stability. This paper applies the Growth Diagnostic methodology to identify the most binding constraints to growth in Bolivia and proposes pathways forward for policy reform.

The paper presents Bolivia’s growth syndrome as “La Diablada” or the dance of the devil—a dance between opposing priorities. On one side lies the need for fiscal consolidation to address mounting imbalances; on the other, an urgent need to stimulate demand and support recovery after the COVID-19 shock. This collision of policy needs creates a situation where missteps in either direction could be highly disruptive, risking either prolonged stagnation or macroeconomic crisis.

The paper finds that Bolivia’s current growth model—heavily reliant on commodity-led rents and public sector-led investment—has reached its limits. The economic challenge is that the historical engine of growth in Bolivia—net government spending fueled by rising gas prices—cannot drive growth in the current period. Even a short-run recovery in gas prices belies the structural challenges in demand for gas exports in Argentina and Brazil, along with the supply of gas, in the lack of investments in new discovery. Structural weaknesses also include a rising wage bill dominated by public employment, the lack of foreign investment, and a lack of economic diversification into higher complexity sectors. Political uncertainty and institutional inefficiencies, especially among state-owned enterprises (SOEs), further erode the country’s fiscal space and growth potential.

To manage current macroeconomic imbalances and lay the groundwork for inclusive growth, the government must prioritize the sequencing of actions across four key policy fronts:

Fiscal Response: Focus on increasing fiscal space to allow for stimulus to drive economic recovery, including smart fiscal consolidation, cutting unproductive spending—especially in loss-making SOEs and an inflated wage bill, while guarding against the recessionary pressures of fiscal consolidation.
External Finance Response: Maximize access to external finance while balancing debt sustainability. Foreign reserves risk not being able to cover medium-term debt obligations, if no action is taken.
Monetary Response: Restore confidence in monetary policy by preparing for a gradual move toward a more flexible exchange rate regime, supported by stronger institutions and clearer communication. Not addressing the overvalued boliviano risks a currency crisis, a balance of payments crisis, or both.
Private Sector Response: Shift the growth model by enabling private sector-led diversification, removing investment bottlenecks, and targeting support to export-oriented, higher-complexity sectors.

At stake is whether Bolivia can shift from managing crises to enabling a more resilient, inclusive, and sustainable future.

Last updated on 05/20/2025

The Quest for Increased Saudization: Labor Market Outcomes and the Shadow Price of Workforce Nationalization Policies

Few countries have embraced active labor market policies to the same extent as Saudi Arabia. In the aftermath of the Arab Spring, the imperative of increasing Saudi employment became paramount. The country faced one of the highest youth unemployment rates in the world while over 80 percent of its private sector consisted of foreign labor. Since 2011, a wave of employment nationalization efforts has been mainly implemented through a comprehensive and strictly enforced industry and firm specific quota system known as Nitaqat. This paper assesses the employment gains as well as the costs and unintended consequences resulting from Nitaqat and related policies between 2011 and 2017. We find that while job nationalization policies generated significant initial gains in Saudi employment and labor force participation, the effects were heterogeneous across workers, firms and sectors. Moreover, our analysis suggests that the resulting unintended consequences far outweighed the benefits over time generating a less cost-effective and productivity inhibiting labor market composition.

Understanding Saudi Private Sector Employment and Unemployment

This paper analyzes the changes in Saudi employment and unemployment between 2009 and 2018 and argues that a supply-demand skill mismatch exacerbated by insufficient job creation, and prevalent Saudi preferences and beliefs about employment underpin the high unemployment problem that coexists with low Saudi employment in the private sector in the country.

A Generation of Italian Economists

We examine the role of financial aid in shaping the formation of human capital in economics. Specifically, we study the impact of a large merit-based scholarship for graduate studies in affecting individuals’ occupational choices, career trajectories, and labor market outcomes of a generation of Italian economists with special focus on gender gaps and the role of social mobility. We construct a unique dataset that combines archival sources and includes microdata for the universe of applicants to the scholarship program and follow these individuals over their professional life. Our unique sample that focuses on the high end of the talent and ability distribution also allows us to analyze the characteristics of top graduates, a group which tends to be under-sampled in most surveys. We discuss five main results. First, women are less likely to be shortlisted for a scholarship as they tend to receive lower scores in the most subjective criteria used in the initial screening of candidates. Second, scholarship winners are much more likely to choose a research career and this effect is larger for women. Third, women who work in Italian universities tend to have less citations than men who work in Italy. However, the citation gender gap is smaller for candidates who received a scholarship. Fourth, women take longer to be promoted to the rank of full professor, even after controlling for academic productivity. Fifth, it is easier to become a high achiever for individuals from households with a lower socio-economic status if they reside in high social mobility provinces. However, high-achievers from lower socio-economic status households face an up-hill battle even in high social mobility provinces.

The Role of the Diaspora in the Internationalization of the Colombian Economy

We studied the geography as well as the demographic and socio-economic characteristics of 1.7 million members of the global Colombian diaspora (34% of the total estimated Colombian diaspora) using census and survey data from major host countries, and 3.5 million Twitter users located around the world presumed to be of Colombian origin. We also studied the locations and industries of Colombian senior managers and directors outside Colombia, using a global database of over 400 million companies. Moreover, we studied the migration journeys, the diaspora’s attachment to Colombia, the level of diaspora engagement and interest in engaging, the intentions to return back home, the interest in diaspora government policy, and the overall sentiment of the diaspora towards Colombia, through a survey which received 11,500 responses from the diaspora in well over 100 countries in less than two months. We additionally interviewed 12 Colombian transnational entrepreneurs and professionals, to understand what attracts them professionally to Colombia, and what may stand in the way of more diaspora engagement and professional growth.

Loreto’s Hidden Wealth: Economic Complexity Analysis and Productive Diversification Opportunities

This report has three main objectives. Firstly, to identify and assess the agglomeration of know-how that is currently present in Loreto’s existing economic activities. Secondly, to define technological proximity metrics based on available data in order to identify the economic activities that generate the most value-added and which require similar productive capacities to those that are already present in the region. Finally, this paper seeks to identify those economic activities that are relatively “adjacent” to Loreto’s stock of productive know-how and which, therefore, have high potential to lead the productive transformation of its economy.

The Growth Lab at Harvard University, with funding provided by the Gordon and Betty Moore Foundation, has undertaken this investigation with the aim of identifying the existing productive capacities in Loreto, as well as the economic activities with potential to drive the structural transformation of its economy. This paper is part of a broader investigation – Promoting Sustainable Economic Growth and Structural Transformation in the Amazon Region of Loreto, Peru – which seeks to contribute with context-specific inputs for the development of national and sub-national public policies that promote productive development and prosperity in this Peruvian state.

Western Australia – Research Findings and Policy Recommendations

The Government of Western Australia (WA), acting through its Department of Primary Industries and Regional Development (DPIRD), invited the Growth Lab of the Center for International Development at Harvard University to partner with the state to better understand and address constraints to economic diversification through a collaborative applied research project. The project seeks to apply growth diagnostic and economic complexity methodologies to inform policy design in order to accelerate productive transformation, economic diversification, and more inclusive and resilient job creation across Western Australia.

This report is organized in six sections, including this brief introduction. Section 2 is an Executive Summary. Section 3 explains the methodologies of Growth Diagnostics and Economic Complexity, including its theoretical foundations and main concepts. Section 4 describes the main findings of the Economic Complexity Report, including a characterization of Western Australia’s complexity profile. This is done at the state, regional, and city levels. Additionally, this section identifies diversification opportunities with high potential and organizes them into groupings to capture important patterns among the opportunities. This section also contextualizes the opportunities further by identifying relevant viability and attractiveness factors that complement the complexity metrics and consider local conditions. Section 5 highlights the main findings of the Growth Perspective Report. This section describes the economic growth process of Western Australia — with a focus on the past two decades — and identifies several issues with the way that growth has occurred. This section highlights three key channels through which negative externalities have manifested: labor market imbalances, pro-cyclicality of fiscal policy, and a misalignment of public goods. The section provides perspectives on the ways in which each of these channels have hampered the quality of growth and explores the deep-rooted factors that underpin these adverse dynamics. Section 6 introduces a policy framework that can be leveraged by WA to capitalize on revealed diversification opportunities and address the factors that impact the quality of the growth process of the state.

Economic Complexity Report for Western Australia

The Government of Western Australia (WA), acting through its Department of Primary Industries and Regional Development (DPIRD), invited the Growth Lab of the Center for International Development (CID) at Harvard University to partner with the state to better understand and address constraints to economic diversification through a collaborative applied research project. The project seeks to apply growth diagnostic and economic complexity methodologies to inform policy design in order to accelerate productive transformation, economic diversification, and more inclusive and resilient job creation across Western Australia.

This Economic Complexity Report is organized in six sections, including this brief introduction. Section 2 explains the methodology of economic complexity, including its theoretical foundations and main concepts, as well as the adjustments that were required to obtain the required export data at a subnational level and incorporate the service sector to the analysis. Section 3 describes the structure of the WA economy, identifying its productive capacities and exploring its complexity profile. This is done at the state, regional, and city levels. Section 4 identifies industries with high potential and organizes them into groupings to capture important patterns among the opportunities. Section 5 contextualizes the opportunities further by identifying relevant viability and attractiveness factors that complement the complexity metrics and consider local conditions, as well as a criterion for regional participation in the state-wide diversification strategy. Finally, Section 6 summarizes the main findings of this report and discusses implications for Government of WA strategy and policy toward capitalizing on these revealed opportunities.

Growth Perspective on Western Australia

This Growth Perspective Report describes both the economic growth process of Western Australia — with a focus on the past two decades — and identifies several problematic issues with the way that growth has been structured. In particular, this report traces important ways in which policies applied during the boom and subsequent slowdown in growth over the last twenty years have exacerbated a number of self-reinforcing negative externalities of undiversified growth. The report analyzes three key channels through which negative externalities have manifested: labor market imbalances, pro-cyclicality of fiscal policy, and a misalignment of public goods. The report includes sections on each of these channels, which provide perspectives on the ways in which they have hampered the quality of growth and explore the reasons why problematic externalities have become self-reinforcing. In some cases, new issues have emerged in the most recent iteration of WA’s boom-slowdown cycle, but many issues have roots in the long-term growth history of WA.

Growth and Competitiveness in Kazakhstan: Issues and Priorities in the Areas of Macroeconomic, Industrial, Trade and Institutional Development Policies

Kazakhstan has achieved many of its goals and faces enormous opportunities. It has been able to transform itself into a market economy, thus unleashing the productive capacity of its citizens and creating the conditions for the country to benefit from international trade and investment. In addition, it has discovered large quantities of oil reserves that will allow it to sustain a tripling of oil production in the next two decades.

Under these conditions, the recent performance of the economy has been characterized by rapid growth with declining unemployment. The economy has been propped up by increased fiscal spending and by private investment. Macroeconomic management has been prudent in the sense that inflation has been kept low, the government has accumulated significant fiscal savings in the National Fund and the Central Bank has built up a significant stock of international reserves. The question is how to make this situation last over the medium and long term and how to make the economy resilient to the shocks that may come.

This report is a collection of policy memos that deal with the choices the government faces going forward in the broad area of macroeconomic policies, including fiscal policy and institutions, monetary and exchange rate arrangements and policies, financial policies, industrial policy, trade policy, and broad issues in institutional development.