Resource information
Ecuador's poor economic performance
is not solely nor mainly the result of high volatility, but
rather the result of poor economic management and,
especially, weak productivity growth. This connection
between productivity and economic growth has become even
more relevant in recent years, after Ecuador decided to
adopt the US dollar as the national currency in 2000, hence
forgoing the option of using exchange rate policy to
generate temporary increases in competitiveness and growth.
Although the decision to dollarize undoubtedly improved the
investment climate, reassured potential investors and hence,
potentially increased the capacity of the economy to create
employment and reduce poverty, sustained increases in
productivity will be required to maintain positive growth
rates and declining poverty rates in the future. As a
consequence, the focus of this report is on productivity
growth and its effect on employment, income and, most
importantly, poverty. The report pays special attention to
the relationship between poverty and the productive sectors,
both from a macroeconomic and a microeconomic point of view,
and both in urban and rural areas. In following this
approach, it not only complements the previous Ecuador
Poverty Assessment (World Bank, 2000c), which focused mainly
on poverty and social services, but also provides important
insights regarding the relationship between economic growth,
productivity and employment generation on the one hand, and
poverty reduction on the other. Moreover, in thinking about
poverty, the report concentrates on monetary, rather than on
non- monetary aspects of well-being, since it is the former
that appears to be more intimately linked to the evolution
of GDP and productivity growth and, hence, has exhibited
little improvement over the past years - namely, while
social outcomes and access to basic services in Ecuador have
improved slowly but continuously since 1980, the national
consumption-based poverty rate increased from 40 to 45
percent between 1990 and 2001, as discussed below, with much
larger increases in urban areas. . Finally, the report makes
use of a variety of sources, both quantitative and
qualitative, as well as of existing work in order to provide
policy recommendations that will help Ecuador and its
government design an effective poverty reduction strategy
based on economic and productivity growth.
