Macroeconomic Performance and Inequality in Colombia: 1976-1996

Abstract

This paper explores the relationship between macroeconomic conditions and urban income distribution in Colombia. The results show that unemployment and inflation have significant regressive effects. Manufacturing output growth is clearly progressive, as well as improved conditions in the rural areas. Currency overvaluation is also related to income concentration. In this sense, it is no surprise that the recent combination of high unemployment, an overvalued currency, and low overall economic growth have resulted in greater inequality. The paper also finds that unemployment and inflation have an adverse effect on education of the poor. Thus, macroeconomic instability is detrimental for the accumulation of human capital, which in turn has a long-term effect on the distribution of income.

JEL Classification: D31