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Changes in the distribution of income and the New Economic Model in Colombia

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  • Bernal, Raquel
  • Cárdenas Santa-María, Mauricio

Abstract

This paper has analyzed the changes in the distribution of income in Colombia since 1976 using data for urban economy (seven largest metropolitan areas) and for the manufacturing sector. Evidence is shown that the structural reforms that took place in the early 1990s have been related to higher income concentration in Colombia, where levels of inequality were already impressively high. The results suggest that both trade liberalization and skill complementary technological change have a positive impact on skill premiums. The evidence presented suggests that skill complementary technological change has been a key force behind the recent increase in the relative demand for more-educated workers. Much of the change in skill intensity has taken place within specific industries, rather than involving large reallocations between sectors. Trade reform has not resulted in a greater expansion of skill intensive sectors relative to unskilled intensive sectors. Quite the contrary, trade liberalization and other reforms, which lowered the user cost of capital and relaxed liquidity constraints, facilitated investment in skill complementary technologies within all sectors of production. Further evidence in this direction is provided by the fact that the largest increases in the relative earnings of the more educated workers took place in the non-traded sectors. The results suggest that both trade liberalization and skill complementary technological change have a positive impact on skill premiums. As the evidence presented in this paper shows, the structural reforms have been related to higher income concentration in Colombia, a country with already impressively high levels of inequality. For this reason, a better understanding of the relationship between the reforms and distribution is crucial to assess the future of the full reform agenda. Obviously this process has to be consistent with higher levels of growth, lower poverty and more equitable distribution of income.

Suggested Citation

  • Bernal, Raquel & Cárdenas Santa-María, Mauricio, 1999. "Changes in the distribution of income and the New Economic Model in Colombia," Series Históricas 7493, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    • Handle: RePEc:ecr:col048:7493
    Note: Includes bibliography
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    File URL: http://repositorio.cepal.org/handle/11362/7493
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    Cited by:

    1. Pablo Astorga, 2015. "Functional Inequality in Latin America: News from the Twentieth Century," Oxford Economic and Social History Working Papers _135, University of Oxford, Department of Economics.
    2. Carlos Medina & Christian Posso, 2010. "Technical Change and Polarization of the Labor Market: Evidence for Brazil, Colombia and Mexico," Borradores de Economia 614, Banco de la Republica de Colombia.
    3. Morley, Samuel A., 2000. "The effects of growth and economic reform on income distribution in Latin America," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    4. Diego Amador, 2008. "Imagining Education: Educational Policy and the Labor Earnings Distribution," Documentos CEDE 5147, Universidad de los Andes, Facultad de Economía, CEDE.
    5. Roberto Perotti, 2000. "Public spending on social protection in Colombia : analysis and proposals," Working Papers Series. Documentos de Trabajo 3407, Fedesarrollo.
    6. Arlen Guarín & Sebastián Londoño & Carlos Medina & Julieth Parra & Christian Posso & Carlos Eduardo Vélez, 2016. "Estimating the Effect of Attending a Public versus a Private University in Colombia on Academic Achievement **** Una Estimación del Efecto sobre el Rendimiento Académico de Asistir a una Universidad P," Borradores de Economia 968, Banco de la Republica de Colombia.
    7. Pablo Astorga, 2015. "Functional Inequality in Latin America: News from the Twentieth Century," Oxford University Economic and Social History Series _135, Economics Group, Nuffield College, University of Oxford.

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