In Colombia, the oil and coal mining industry is an important source of fiscal revenues, including royalties. The Sistema General de Regalías (or General Participation System, GPS) has therefore been set up to organise the transfer of these royalties – that come from the exploitation of non-renewable natural resources – from the Ministry of Finance and Public Credit to territorial entities. These resources finance the provision of services in the sectors of education, health, drinking water and basic sanitation, general purpose and special allocations, in the different regions of Colombia. This mechanism aims at ensuring a fair distribution of income, which is essential since spatial inequalities in terms of access to services are still significant in Colombia – as shown by the multidimensional diagnosis of inequalities carried out with the support of AFD. For example, while in urban areas, the secondary education coverage rate is close to 100%, it is 50% in rural areas.

The Strategy for monitoring, follow-up and control of the resources of the GPS is a public policy tool led by the Ministry of Finance and Public Credit to carry out control over the management of the resources transferred. This strategy, in implementation for almost 15 years, identifies alerts and cases of non-compliance with the goal of assuring continuity, coverage and quality in the provision of public services. This seeks to prevent and mitigate risks in the provision of social services throughout Colombia, which is essential for the construction of equity across the country, as well as to prevent territorial gaps from widening with regards to the institutional capacities of local governments and to the provision of social services for all populations, regardless of their location. 

This project is part of the Extension of the EU-AFD Research Facility on Inequalities. Coordinated by AFD and financed by the European Commission, the Extension of the Facility will contribute to the development of public policies aimed at reducing inequalities in four countries: South Africa, Mexico, Colombia and Indonesia over the period 2021-2025.

This work is also part of AFD's dialogue with the Colombian authorities on tax reform and the reduction of spatial inequalities.

This research project seeks to generate recommendations with the purpose of analysing and strengthening the role of the GPS tool – “the Strategy” – as a mechanism for closing territorial gaps in institutional capacities to provide social services.

Two research objectives have been identified, one in the field of diagnosis, and another in the field of recommendations:

• Identify the achievements, limitations, and challenges of the implementation of the Strategy in closing territorial gaps in the institutional capacities of territorial entities and in the provision of essential social services.
• Provide recommendations to strengthen the Strategy in its role of institutional assistance for the closing of territorial gaps.

The project will focus on sectors that receive more resources from the GPS, present more risks in their provision and are the most relevant as essential social services:

• Education;
• Health;
• Drinking water and basic sanitation;
• Indigenous reservations.

The research methodology will be mixed methods and will include:

• A document review at the level of the Ministry of Finance and Public Credit and the territorial entities selected as a case study;
• A secondary data analysis;
• In-depth interviews with a subsample of the selected territorial entities.

You will find below the different research papers related to this project:

In progress

Contact: 

• Anda David, AFD Research Officer

The design of the Colombian pension system exacerbates income inequality and poverty after retirement age. High informality rates (over 60% of total employment, according to OECD) imply that many workers in Colombia have a low probability of qualifying to get a contributory pension. Despite the targeted support provided to the vulnerable population through pension assistance programs, this support  tends to be low compared to other countries in Latin America and the Caribbean.

The relationship between informality and inequality after retirement plays a central role in the discussion of policies affecting the labour market. One dimension that has not been explored in the public policy debate is how policies aimed to mitigate climate change (and more specifically the creation of green jobs) can affect the distribution of workers between the formal and informal sectors, and how it can have an impact income inequality after retirement.

Find out more about the Extension 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. 

The project will aim to answer following questions, in the Colombian context:

• What are the environmental properties of jobs?
• How can economic transformation towards a more sustainable economy change the composition and transitions between the formal and informal sector?
• What is the impact on inequality and fiscal viability of implementing those policy scenarios?

In addition, the project will evaluate prospective scenarios during the discussion of the pension reform in the  Colombian Congress and will develop a simulation model for the use of the Ministry of Finance and Public  Credit.

The project will be implemented in three stages:

• The research team will first characterize the environmental properties of jobs in Colombia.
• In the second stage, the team will calibrate the transition matrices between employment states and wages to introduce to the microsimulation model. In this stage, the team will propose the economic transition scenarios to simulate.
• In the final stage of the project, the team will prepare a final report with the simulation results and policy discussion.

You will find below the different research papers related to this project:

• Quantifying Green Job Potential in Colombia: A Task-Based Approach (November 2024)
• Greening Colombia’s Energy: The Future of Jobs and Pensions (August 2025)

While there is mounting evidence that the Covid-19 pandemic has increased socioeconomic inequality, there is still a need to understand the exact channels of impact and what role the policy response has played in different contexts. It is also necessary for governments to be clear about the efficiency of the type of policies they have implemented throughout this period, in terms of the redistributive and/or regressive effect both from an inequality and poverty perspective. Indeed, we know that the amount of additional social spending (excluding health) implemented during the pandemic reached almost 3% of GDP in Colombia and only 0,2% in Mexico. However, research has not yet demonstrated whether the redistributive policies introduced by the Mexican and Colombian governments in response to the Covid-19 crisis have had any positive effect on the distribution of economic and social resources in these two countries.

The project will seek to understand what has been the redistributive impact of social and fiscal policy in Mexico and Colombia, in the context of the policies implemented during the Covid-19 pandemic.

This research project will be conducted as follows: 

1. Using the framework of the Commitment to Equity (CEQ) methodology, an analysis aiming to differentiate what has been the progressivity or regressivity of the policies implemented during the Covid-19 pandemic will be conducted. This analysis will take into account the main beneficiary groups of these policies and will include a comparison between the budget amount and the efficiency of the policies identified in terms of inequality and poverty reduction.  
2. A desktop analysis of the decision-making will also be carried out to understand how the redistributive effects of the policies implemented were envisaged by the governments. 

The results of this project are presented in the following research paper: Promoting a More Progressive Approach - Evaluating the Impact of Social and Fiscal Policies in Mexico and Colombia amidst the Covid-19 Pandemic (2025)

This research paper analyzes the redistributive impact of some fiscal policies and social programmes (direct taxes and transfers) before and after the pandemic Crisis in Mexico and Colombia, following the CEQ methodology. 

Download the paper