Industrial Policy and Structural Change in Bolivia: Resource Curse or Historical Institutional Failure?

Abstract

After fifteen years of state interventionism during the presidencies of Evo Morales in Bolivia, the data show that the country did not achieve the desired structural changes. The literature offers two explanations for this industrialisation failure: first, the resource curse hypothesis, and second, a dysfunctional institutional framework. However, none of these analyses look at the wide variety of instruments used to apply industrial policy in order to reach deeper conclusions on the nature of industrial performance. In our analysis, we adopt a wider scope (financial, fiscal and trade incentives) in order to explain the specific nature of the failure of industrial policy in Bolivia. Our results point to two causes of industrial failure. Firstly, the strategic sectors suffered from classic institutional problems (bureaucratic inefficiencies, politicisation, etc.) and secondly, the new manufacturing sectors showed a pattern of rentier behaviours associated with the resource curse expenditure boom.