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Working Papers
A Change of Denomination: The Case for CPI-Indexed World Bank Lending
This paper asks whether the World Bank can change the denomination of its lending without weakening its own financial position. Using monthly CPI and exchange-rate data, we construct the dollar […]
This paper asks whether the World Bank can change the denomination of its lending without weakening its own financial position. Using monthly CPI and exchange-rate data, we construct the dollar returns the Bank would earn on loans indexed to borrowers’ domestic inflation and aggregate those returns using current IBRD and IDA portfolio weights. Country returns are volatile. Portfolio returns are much calmer because cross-country correlations are low. The diversification dividend is large enough to make the financially indifferent coupon on a CPI-indexed instrument close to, and in some cases below, current lending rates. The World Bank can reduce one of the core sources of macroeconomic instability in borrowing countries at little or no financial cost to itself.
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Journal Articles
Raising the Bar: An Inclusive Global Poverty Line
The first of the United Nations 2015 Sustainable Development Goals is: “End poverty in all its forms everywhere.” An implication of this broad goal is the existence of an array […]The first of the United Nations 2015 Sustainable Development Goals is: “End poverty in all its forms everywhere.” An implication of this broad goal is the existence of an array of poverty lines, which raises the question of an appropriate lower-bound and an upper-bound to global poverty lines. The ‘dollar-a-day’ poverty line (updated for inflation to P$2.15 in 2017 PPP) is widely accepted as a global lower-bound poverty line (GLBPL). However, while different countries, organizations, and authors use higher poverty lines, there is no consensus on a global upper bound poverty line (GUBPL). We estimate a GUBPL using two conceptually distinct approaches, both grounded in the tension between the focus axiom for poverty measures and standard economic social welfare measures. We set a candidate GUBPL either at: (i) the consumption consistent with the achievement of adequate material well-being or (ii) the consumption level where marginal utility is “near enough” zero. Using either approach, empirical results across an array of measures of well-being demonstrate that ad hoc poverty lines, including the World Bank’s highest reported poverty line of P$6.85, are far too low to be plausible candidates for a GUBPL. Using the two approaches across four distinct indicators of well-being all of the empirical results suggest a GUBPL of at least P$21.5, ten times higher than the standard GLPBL of P$2.15. The use of both a lower bound and upper bound global poverty line balances the radically exclusive nature of the ‘dollar-a-day’ standard, which classifies people with very low levels of material well-being and hence very high marginal utility of income as “not poor” with an equally radically inclusive GUBPL which counts only those with globally high material achievement and low (ish) marginal utility of income as “not poor.”
UNU-WIDER blog: Raising the bar – an inclusive poverty line
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Working Papers
Complexity: Hausmann-Hidalgo Economic Complexity
Economic complexity is an active field with a growing number of methodologies and applications. Among the different paradigms, the Hausmann-Hidalgo economic complexity framework offers a way to quantify the sophistication […]
Economic complexity is an active field with a growing number of methodologies and applications. Among the different paradigms, the Hausmann-Hidalgo economic complexity framework offers a way to quantify the sophistication and productive knowledge embedded in an economy. In this work, we provide an overview of its foundational concepts, empirical applications, policy uses, and directions for future research. We aim to equip readers with a basic understanding of this framework in simple words and to help them navigate the vast literature. We argue that the Hausmann-Hidalgo economic complexity serves as a flexible framework for understanding the dynamics of knowledge diversification across multiple economic domains and provides a starting point for the design of place-based policies. -
Journal Articles
AI and Trade: Why Europe Cannot Afford to Lag on Adoption
EconPol Forum, 27, 15-20.
Our analysis shows that countries can benefit from foreign AI progress through cheaper imports, but without sufficient domestic adoption, they risk losing competitiveness in AI-exposed sectors.Artificial intelligence (AI), and generative AI in particular, is poised to transform productivity across a broad range of activities, with the strongest effects concentrated in knowledge-intensive services such as finance, professional services, and ICT. Its economic impact will nevertheless depend on how quickly countries adopt and integrate it into their economies. Evidence points to substantial cross-country differences in adoption, particularly within Europe. Yet AI is not only a domestic transformation; it is also a productivity shock transmitted through international trade. Productivity gains abroad lower import prices and reshape competitiveness across countries and sectors. Our analysis shows that these forces interact: countries can benefit from foreign AI progress through cheaper imports, but without sufficient domestic adoption, they risk losing competitiveness in AI-exposed sectors. The global diffusion of AI therefore makes domestic adoption capacity and openness to trade complementary determinants of future growth.
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Working Papers
Japan’s Innovation Challenge: Escaping the Middle-Technology Trap
Japan remains one of the world’s most technologically sophisticated economies, yet its labor productivity has been stagnant for more than two decades. This paper investigates the apparent contradiction between Japan’s high R&D intensity and its weak productivity performance by examining the allocation, composition, and effectiveness of innovation across industries.
Japan remains one of the world’s most technologically sophisticated economies, yet its labor productivity has been stagnant for more than two decades. This paper investigates the apparent contradiction between Japan’s high R&D intensity and its weak productivity performance by examining the allocation, composition, and effectiveness of innovation across industries. Using industry-level data from the OECD, patent-level data linked across technology and industry classifications, and a set of nine technological taxonomies, we document that Japan disproportionately concentrates R&D in mid-technology manufacturing sectors—such as motor vehicles, electrical equipment, and chemicals—that generate relatively low productivity spillovers. High-technology sectors, including ICT, pharmaceuticals, scientific R&D, and advanced digital services, receive a significantly smaller share of investment and exhibit much higher productivity contributions in other countries. We further show that Japan’s indirect, tax-based system of R&D support reinforces this equilibrium by favoring large incumbents and under-supporting SMEs. We conclude by assessing the potential of Japan’s new 17-sector strategy to reorient the innovation system toward frontier technologies. -
Working Papers
Un Giro Económico para Bolivia: Principales Hallazgos y Prioridades de Reforma
Esta publicación sintetiza los principales hallazgos y recomendaciones de la serie de investigaciones: Un giro económico para Bolivia. Examinamos los orígenes de la crisis actual y proponemos una estrategia para […]Esta publicación sintetiza los principales hallazgos y recomendaciones de la serie de investigaciones: Un giro económico para Bolivia. Examinamos los orígenes de la crisis actual y proponemos una estrategia para restablecer la estabilidad macroeconómica y, al mismo tiempo, apoyar el crecimiento de largo plazo. El colapso macroeconómico de Bolivia es el síntoma más visible de una crisis más profunda tras un deterioro institucional que debilitó la inversión privada, la capacidad exportadora y el crecimiento de la productividad en toda la economía. En respuesta, presentamos un plan integral de reformas basado en cinco pilares: 1) una consolidación fiscal creíble y que impulse el crecimiento; 2) una red de compensación social eficaz y focalizada; 3) el restablecimiento del equilibrio externo y de la credibilidad monetaria; 4) una renovada capacidad de atracción de inversiones para sectores exportadores; y 5) una base institucional que fomente el desarrollo de nuevas capacidades productivas.
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Working Papers
Bolivia’s Economic Pivot: Main Findings and Reform Priorities
This publication synthesizes the main findings and recommendations from a series of reports on Bolivia’s Economic Pivot. We examine the origins of the current crisis and propose a strategy to […]This publication synthesizes the main findings and recommendations from a series of reports on Bolivia’s Economic Pivot. We examine the origins of the current crisis and propose a strategy to restore macroeconomic stability while supporting long-term growth. Bolivia’s macroeconomic collapse is the most visible symptom of a much deeper crisis. While the contraction of natural gas production was a key trigger, the country’s crisis stems from a broader institutional breakdown that weakened private investment, export capacity, and productivity growth across the economy. In response, we outline a comprehensive reform plan based on 5 pillars: 1) a growth-enhancing and credible fiscal consolidation; 2) an effective and targeted social compensation network; 3) a restoration of external balance and monetary credibility; 4) renewed investment attractiveness and restored export potential in strategic sectors; and 5) a new institutional foundation for developing new productive capabilities.
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Working Papers
Un Giro Económico para Bolivia: La Gestación de la Crisis Macroeconómica
La crisis macroeconómica de Bolivia se fue gestando durante muchos años. Una bonanza temporal de materias primas en la década de 2000 y un sector gasífero construido en los años […]La crisis macroeconómica de Bolivia se fue gestando durante muchos años. Una bonanza temporal de materias primas en la década de 2000 y un sector gasífero construido en los años noventa dieron lugar a una década de crecimiento, mayores ingresos fiscales y una acumulación sin precedentes de activos externos. Pero, en lugar de aprovechar esa oportunidad para desarrollar nuevas fuentes de ingresos por exportaciones y aumentar la capacidad productiva, el país adoptó políticas que fueron debilitando gradualmente el mismo sector gasífero del que dependía el modelo. Cuando colapsaron la producción de gas y los ingresos por hidrocarburos, el Estado optó por preservar el gasto y el tipo de cambio fijo. El resultado fue una secuencia de medidas cada vez más costosas: primero la pérdida de reservas internacionales, luego el quiebre del régimen cambiario, el aumento del impuesto inflacionario y la represión financiera. En el proceso, el valor real de los ahorros de los bolivianos se fue erosionando a través del sistema de pensiones y de los depósitos bancarios. Este trabajo muestra cómo esa estrategia postergó el ajuste durante casi una década y terminó agravando la crisis. Mediante estimaciones contrafactuales del producto y del tipo de cambio real, cuantifica el costo de la demora y la magnitud de las distorsiones que cualquier programa de estabilización deberá ahora corregir.
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Working Papers
Bolivia’s Economic Pivot: The Making of a Macroeconomic Crisis
Bolivia’s macroeconomic crisis was long in the making. A temporary commodity windfall and a gas export engine built in the 1990s delivered a decade of growth, rising fiscal revenues, and […]Bolivia’s macroeconomic crisis was long in the making. A temporary commodity windfall and a gas export engine built in the 1990s delivered a decade of growth, rising fiscal revenues, and an unprecedented buildup of foreign assets. But instead of using that window to build new sources of tradable income and productive capacity, the country adopted policies that gradually weakened the very gas sector on which the model depended. As gas production and hydrocarbon revenues fell, the state chose to preserve spending and the fixed exchange rate. The result was a sequence of increasingly costly stopgaps: first the depletion of international reserves, then the collapse of the peg, the rise of the inflation tax, and financial repression. In the process, households saw the real value of their savings eroded through the pension system and bank deposits. This paper shows how that strategy delayed adjustment for nearly a decade while making the eventual crisis more severe. Using counterfactual benchmarks for output and the real exchange rate, it quantifies the cost of delay and the scale of the distortions that any stabilization program must now unwind.
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Working Papers
Bolivia’s Economic Pivot: Early Macroeconomic Achievements and Remaining Challenges
This paper assesses Bolivia’s macroeconomic stabilization prospects through a macro-financial scenario framework, comparing three distinct trajectories: a counterfactual absent any reforms, the path under reforms implemented or announced to date […]This paper assesses Bolivia’s macroeconomic stabilization prospects through a macro-financial scenario framework, comparing three distinct trajectories: a counterfactual absent any reforms, the path under reforms implemented or announced to date (April 2026), and one that assumes a select set of additional reforms. Bolivia’s crisis, rooted in the absence of fiscal adjustment after the collapse of natural gas revenues, ranks among the most challenging in this century. Absent any reform, Bolivia was on the verge of a collapse, including a sharp contraction of imports, deep recession, runaway monetary financing, accelerating inflation, and a high probability of external default. The new government’s initial measures have reduced immediate risks. However, the initial reform package remains insufficient for full stabilization. The paper describes a feasible set of additional reforms to achieve stabilization and growth. An expansionary fiscal consolidation is still possible if reforms are carried out following a specific set of conditions, given Bolivia’s current economic constraints. Stabilization and growth are achievable, but the window of opportunity will narrow if critical reforms are delayed.