Macroeconomic Policy and Pro-Poor Growth in a Dualistic Economy: The Case of Bolivia

With the adoption of the Millenium Development Goals, poverty reduction has been placed at the centre of international policy debates on economic development. The ability to achieve rapid poverty reduction critically depends upon the extent of economic growth and on its impact on poverty. This, in turn, depends on initial inequality and changes in inequality during the growth process (Klasen 2005). As can be shown analytically, the highest poverty impact will occur in an environment of low initial inequality and pro-poor distributional changes (World Bank 2000; Bourguignon 2003). As a result of these findings, the term ‘pro-poor growth’ (PPG) has been coined to describe growth that achieves high rates of poverty reduction (Klasen 2004; AfD et al. 2005).