Extension of the Research Facility on Inequalities in Colombia

Recent years have been marked by positive economic growth in Colombia with growth rates overall above 3% per year, which has enabled many people to escape poverty. Indeed, the poverty rate has decreased from 40.8% in 2012 to 35.7% in 2019. The signing of the Peace Accords between the government and the Revolutionary Armed Forces of Colombia (FARC) in 2016 also represented an opportunity to move forward towards building a more prosperous and equal country. However, despite these positive developments,

Colombia remains one of the most unequal countries in the region with a Gini coefficient between 0.55 and 0.6 according to the latest UNDP report. The Covid-19 pandemic has certainly reinforced these levels of inequality, particularly in terms of access to education and health.

In order to address this multidimensional issue, a program to support the development of public policies aimed at reducing inequalities will be implemented through the Extension of the EU-AFD Research Facility on Inequalities (RFI), in close collaboration with the Colombian government. 

Preliminary research is already underway in partnership with the Fedesarrollo research center, which is in charge of drafting a diagnostic of inequalities. This diagnostic, based on the Handbook developed during the first phase of the Facility, provides an overview of inequalities in the country on different themes (income, health, education, etc.). This multidimensional study will thus make it possible to identify priority areas of intervention for the reduction of inequalities in the country and will serve as a basis for further research and public policy dialogue between the various actors concerned. The diagnostic will also be a relevant tool to accompany the Colombian government in the implementation of programs that have an effect on the reduction of inequalities. 

In addition, the topic of tax policy and public spending was also raised in prior consultations with various Colombian stakeholders and thus emerged as a focus for the Extension of the RFI. Research work was initiated using the Commitment to Equity (CEQ) methodology. This study will permit to evaluate the impacts of a set of public policies that could be implemented to reduce inequalities in the country in close collaboration with the Colombian government. 

In parallel, the Extension of the RFI will produce, in partnership with DANE, a statistical study on inequality in Colombia. It will strengthen the production of Colombian statistics on inequalities, making accurate and robust data available to the public. More generally, this study aims to support decision-making in terms of public policies and actions or reforms aimed at reducing inequalities in Colombia.

In order to support the Colombian government in the development of public policies aimed at reducing inequalities, the Extension of the EU-AFD Research Facility on Inequalities, in close collaboration with local research centers and local authorities, is implementing three projects:

• The elaboration of the Multidimensional Diagnostic on inequalities and the generation of statistics on inequalities with the DANE (National Administrative Department of Statistics). The diagnostic is a statistical overview of inequalities from multiple angles and seeks to support public policy decisions by providing key information for the reduction of the most important gaps in the country. 
• The implementation of the fiscal incidence analysis through the methodology of the Commitment to Equity (CEQ), and the elaboration of a tool to perform micro-simulations, in close collaboration with the Ministry of Finances, which enabled us to assess the impact on inequalities of the latest tax reform in the country.
• A study on Green jobs, pension system and inequality after retirement in Colombia. This project seeks to contribute to the public policy debate by analysing the effects that scenarios of a green economic transformation may have on income inequality after retirement, via the reallocation of workers between the formal and informal labour markets.