Latin America is one of the regions of the world with greater income inequality. Although countries such as El Salvador and Uruguay also have decreased levels of income, others such as Brazil and Guatemala have very high disparity household income levels.
Despite a moderate reduction of the inequality in Colombia, the country continues to be on the list of greater concentration distribution. The levels of personal income inequality could be explained by two distinct factors: on one hand, the income gaps in average income between regions or provinces and on the other, the inequality within these same geographic divisions.
Therefore, despite that the Provinces of Antioquia and Boyacá have similar (and high) income concentration; a difference of 48.4% in average income between these two provinces has a significant bearing over the inequalities of the country.
Likewise, although the inequality within a province decreased, the national total could increase if the gaps between them also increased. Therefore the importance of the differences in geographic income on the explanation of distribution in Colombia.
How chronic and systematic are these differences in the country? How has inequality changed between and within provinces between 2002 and 2015? What sources of income have contributed to modify the distribution patterns? Which policy alternatives could solve these disparities? These are just some of the questions the research project called, “Income inequality in Colombia: A study per provinces”, is looking into.
The study analyses income distribution in Colombia between 2002 and 2015 and takes into account information sources such as the Colombian Household Survey carried out by the National Administrative Department of Statistics (DANE, for its Spanish acronym), considering provinces as analysis units (23 provinces and Bogotá) and household per capita income as a variable. Also, the analysis took into consideration inequality indices such as the Gini Coefficient and the Theil Index.
Social and economic development is not a process of spontaneous convergence, but is spatially differentiated; therefore, an important aspect that explains inequality in countries is the gap between territories or geographic areas.
One of the conclusions of this study is that Colombia has great divergence between the main geographic economic centers and the rest of the provinces, which have greater population participation than in the income.
Therefore, Bogotá and the Provinces of Antioquia, Cundinamarca, Valle del Cauca, and Santander, have 63.3% of the income where 13% of the inhabitants live, as opposed to the Provinces of Caquetá, Cauca, Chocó, Córdoba, La Guajira and Sucre, which only receive 7%.
The geographic differences hinder the benefits which a greater integration and social and economic articulation could have between regions and provinces in the country. Additionally, they also deepen poverty, development lags, unemployment and low salaries.
Colombia has great geographic diversity in the inequality levels per province. In contrast with poverty, which is focused on the coastal regions of the country, income distribution is spatially differentiated, without patterns between magnitude and concentration.
Therefore the provinces with less household per capita income such as Chocó and La Guajira, have greater inequality; however Antioquia has greater and highly concentrated income level. While in Atlántico and Caquetá an individual part of the poorest 10% would have to multiply his income by 6.5 to belong to the richest 10%, in Chocó the same individual would have to multiply by 21.
Therefore, a greater level of development does not guarantee improvements in distribution terms; similarly, in some territories, the lag does not necessarily mean high inequalities. This result highlights the importance of understanding inequality not only as a product of the gaps between provinces but also the complexities in the explanations of disparities between them.
A moderate reduction in inequality in Colombia (between 9% and 20% from 2002 to 2015, according to the considered indicator) has been linked to distribution changes in provinces, but not to closing gaps between them.
Not all provinces have had positive redistributions or of the same magnitude: Antioquia, Atlántico and Bogotá head the reduction in inequality, while Caldas, Norte de Santander, and Tolima did not show an important redistribution pattern during the analyzed period. Furthermore, income gaps still persist between the main and peripheral provinces, limiting better welfare distribution.
The great income gaps between Colombian provinces, their persistence in recent times and the differences in levels and the inequality explanation among them, implies that policymakers need to consider differentiated strategies in the search for a more equal and inclusive country and look for a more integrated and less divided society.
Tax policy is a manner to achieve a more equitable income; so it would be pertinent to think about a tax differentiation mechanism. This mechanism would need to appease the gaps among provinces and also promote the development of the lagging regions in terms of community welfare.
In this sense, it is necessary to consider aspects such as education coverage and quality at all levels (quality decentralization, and investment in school infrastructure); active job market policies which consider economic vulnerability and the occupational structure (employment for youngsters and single mothers, employment initiatives and rural development); productive alternatives in certain regions (co-ops, work and community property, access to peasant production markets); sectorial focalized policies and potentialities of job migration.
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