Publication: The Distributive Impact of Taxes and Expenditures in Colombia
Loading...
Published
2020-03
ISSN
Date
2020-03-05
Author(s)
Editor(s)
Abstract
Colombia has reduced extreme poverty in the past 16 years by almost half, moderate poverty by 22 percentage points, and made more than four million Colombians jump the threshold of multidimensional poverty. However, it remains one of the most unequal countries in the region, after Brazil and Panama. Fiscal policy is one of the instruments that allow governments to speed up the decline in inequality levels and reduce poverty. This study presents an exhaustive and comprehensive analysis of the distributional impacts of taxes and expenditures in Colombia in 2017. It makes a methodological comparison with the Commitment to Equity, which was previously implemented, and includes multiple improvements in the methodology. The results suggest that the combined effect of taxes and social spending in Colombia contributes to poverty reduction between 0.3 and 2.6 percentage points for US$5.5 and US$3.2 per day per person respectively, while inequality is reduced by almost one Gini point. Taxes and direct transfers, as well as indirect transfers, are progressive and pro-poor, while indirect taxes are regressive and contribute to an increase in inequality. Finally, transfers in-kind for education and health services are progressive and contribute to the reduction of inequality.
Link to Data Set
Citation
“Jairo, Nunez; Olivieri, Sergio; Parra, Julieth; Pico, Julieth. 2020. The Distributive Impact of Taxes and Expenditures in Colombia. Policy Research Working Paper;No. 9171. © World Bank. http://hdl.handle.net/10986/33414 License: CC BY 3.0 IGO.”
Digital Object Identifier
Associated URLs
Associated content
Other publications in this report series
Publication Climate and Social Sustainability in Fragility, Conflict, and Violence Contexts(Washington, DC: World Bank, 2026-01-07)Climate change is widely recognized as a driver of violent conflict, but its broader social effects remain less understood. Ignoring these dimensions risks a vicious cycle where climate policies might undermine socially just adaptation. Evidence is still limited on how climate shocks influence political participation, trust, or migration. This paper helps fill that gap by examining links between climate change, conflict, and social sustainability, with a focus on inclusion, resilience, cohesion, and legitimacy. Using secondary data from 2019–24, the study applies simple correlation-based methods to test three hypotheses on the nature, severity, and composition of these associations. The analysis combines multiple climate impact measures, new conflict classifications, recent social sustainability frameworks, and controls for population and geography. The results reveal strong correlations—not causation—between climate events and contexts of fragility, conflict, and violence. Climate impacts are most pronounced in both national and subnational conflict settings. The study also finds robust links between fragility, conflict, and violence and low levels of social sustainability, reflecting its role as both a driver and consequence of conflict. Some dimensions—such as violent events and insecurity—appear weaker in areas most affected by climate shocks. Two of the hypotheses are supported, and one remains inconclusive.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication Institutional Capacity for Policy Implementation: An Analytical Framework(Washington, DC: World Bank, 2026-01-07)State capacity is an important prerequisite for policy implementation, yet at the country level it is difficult to measure, assess, and reform. This paper proposes a focus on institutional capacity: the ability of public institutions to implement the specific policy mandates for which they are responsible. Based on a review of existing literature, the paper defines the different dimensions that compose institutional capacity and groups them into two cross-cutting categories: organizational dimensions (personnel, financial resources, information systems, and management practices) and governance dimensions (transparency, independence, and accountability). The paper proposes measures for organizational and governance dimensions using existing data, shows intra-institutional variation of these measures within countries, and discusses how new data could be collected for better measurement of these concepts. Finally, the paper illustrates how the framework can be used to diagnose the sources of common problems related to weak policy implementation.Publication South Africa’s Fragmented Cities: The Unequal Burden of Labor Market Frictions(Washington, DC: World Bank, 2026-01-08)Using high-resolution administrative, census, and satellite data, this paper shows that South African cities are characterized by spatial mismatches between where people live and where jobs are located, relative to 20 global peers. Areas within 5 kilometers of commercial centers have 9,300 fewer residents per square kilometer than expected, which is 60 percent below the global median. Poor, dense neighborhoods are most affected. In Johannesburg, a 10-percentile increase in distance from the nearest business hub corresponds to a 3.7-percentile drop in asset wealth (a proxy of household wellbeing) and 4.9-percentile drop in employment. In Cape Town, the declines are 4.0 and 3.7 percentiles, respectively. Employment is 87 percent lower in the poorest decile than the richest in Johannesburg and 61 percent lower in Cape Town. These findings suggest that South Africa’s spatial organization of people and economic activity constrains agglomeration and reinforces inequality. This methodology provides a scalable and standardized data-driven framework to analyze spatial accessibility and agglomeration frictions in complex, data-constrained urban systems.Publication Investment in Emerging and Developing Economies(Washington, DC: World Bank, 2026-01-07)The world faces a pressing challenge to meet key development objectives amid slowing growth and rising macroeconomic and geopolitical risks. With the number of job seekers rising rapidly, infrastructure shortfalls continuing to be large, and climate costs mounting, the case for a significant investment push has never been stronger. Yet the capacity to respond in many emerging markets and developing economies has eroded. Since the global financial crisis, investment growth has slowed to about half its pace in the 2000s, with both public and private investment weakening. Foreign direct investment inflows—a critical source of capital, technology, and managerial know-how—have also fallen sharply and become increasingly concentrated, leaving low-income countries with only a marginal share. The risks of further retrenchment are significant, as trade tensions, policy uncertainty, and elevated debt levels continue to weigh on investment. Reigniting momentum will require ambitious domestic reforms to strengthen institutions, rebuild macro-fiscal stability, and deepen trade and investment integration—the foundations of a supportive business climate. At the same time, international cooperation is indispensable. A renewed commitment to a predictable system of cross-border trade and investment flows, combined with scaled-up financial support and sustained technical assistance, is essential to help emerging markets and developing economies—especially low-income countries and economies in fragile and conflict situations—bridge financing gaps and implement the domestic reforms needed to restore investment as an engine of growth, jobs, and development.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Assessing Poverty and Distributional Impacts of the Global Crisis in the Philippines : A Microsimulation Approach(2010-04-01)As the financial crisis has spread through the world, the lack of real-time data has made it difficult to track its impact in developing countries. This paper uses a micro-simulation approach to assess the poverty and distributional effects of the crisis in the Philippines. The authors find increases in both the level and the depth of aggregate poverty. Income shocks are relatively large in the middle part of the income distribution. They also find that characteristics of people who become poor because of the crisis are different from those of both chronically poor people and the general population. The findings can be useful for policy makers wishing to identify leading monitoring indicators to track the impact of macroeconomic shocks and to design policies that protect vulnerable groups.Publication Assessing Ex Ante the Poverty and Distributional Impact of the Global Crisis in a Developing Country : A Micro-simulation Approach with Application to Bangladesh(2010-03-01)Measuring the poverty and distributional impact of the global crisis for developing countries is not easy, given the multiple channels of impact and the limited availability of real-time data. Commonly-used approaches are of limited use in addressing questions like who are being affected by the crisis and by how much, and who are vulnerable to falling into poverty if the crisis deepens? This paper develops a simple micro-simulation method, modifying models from existing economic literature, to measure the poverty and distributional impact of macroeconomic shocks by linking macro projections with pre-crisis household data. The approach is then applied to Bangladesh to assess the potential impact of the slowdown on poverty and income distribution across different groups and regions. A validation exercise using past data from Bangladesh finds that the model generates projections that compare well with actual estimates from household data. The results can inform the design of crisis monitoring tools and policies in Bangladesh, and also illustrate the kind of analysis that is possible in other developing countries with similar data availability.Publication The Impact of Macroeconomic Policies on Poverty and Income Distribution : Macro-Micro Evaluation Techniques and Tools(Washington, DC : World Bank and Palgrave Macmillan, 2008-01-19)This book assembles methodologies and techniques to evaluate the poverty impact of macroeconomic policies. It takes as a departure point a companion volume, the impact of economic policies on poverty and income distribution: evaluation techniques and tools. This volume was primarily a review of microeconomic techniques aimed at assessing policies that are directly concerned with the welfare of poor households or individuals such as changing the level of cash transfers to the poorest households, increasing price subsidies for basic consumer goods, and the like. In addition, the second part of that earlier publication introduced basic techniques to deal with the poverty impact of macroeconomic policies that by definition are not targeted and affect the whole population. This volume presents a comprehensive array of macro-micro modeling frameworks. It begins by highlighting the limitation of macroeconomic models that use representative household groups to link macroeconomic policies and microeconomic data. It then moves to more complexes, top-down modeling frameworks, which combine (top) macro models and (down) micro simulation models that, in turn, can be simple micro accounting models or behavioral micro models. The book also explores integrated models, in which the macro and micro parts are either linked by iterative feedback loops or solved simultaneously as a single model. By providing clear access to these techniques, by documenting their analytical underpinnings, their data requirements, and their range of applicability, and even by highlighting some of their limitations, this book provides a unique compendium for practitioners, policy makers, and anyone interested in economic development.Publication Welfare Dynamics in Colombia(World Bank, Washington, DC, 2018-05)This study explores the short-run transitions between poverty, vulnerability, and middle class, using synthetic panels constructed from multiple rounds of Colombia's Integrated Household Survey (in Spanish Gran Encuesta Integrada de Hogares). The paper reports results from two approaches to define a vulnerability line: the first one employs a nonparametric and parsimonious model, while the second utilizes a fully parametric regression model with covariates. The estimation results suggest a range of between $8 to $13 per day per person in 2005 purchasing power parity dollars as the vulnerability line. Using an average daily vulnerability line of $10 per day per person, subsequent estimates on welfare dynamics suggest that, during the past decade, 20 percent of the Colombian population experienced downward mobility, and 24 percent experienced upward mobility. Furthermore, upward mobility increases with higher education levels and is lower for female-headed households.Publication Gender Differences in Poverty in Colombia(World Bank, Washington, DC, 2018-08)This note presents the gender poverty profiles for Colombia using a lifecycle approach. In Colombia, as in the vast majority of countries around the world, girls and boys are consistently poorer than adults and seniors. Notwithstanding, the difference on poverty rates between women and men during their reproductive age in Colombia is around 6 p.p. while in the world is around 2 p.p. Another interesting finding is that the likelihood of being poor diminishes with formal education, for both women and men. Nevertheless, as the level of formal education increases, the share of women among the poor do so also. This note is organized as follows: section one presents the poverty rates for women and men, by education level, marital status, location, and employment type. Section two presents the results of the lifecycle approach. The authors present the gender poverty profile when variables as age, demographic, and economic composition are combined with gender, to define the profiles. And finally, section three presents some final remarks.
Users also downloaded
Showing related downloaded files
Publication World Bank East Asia and Pacific Economic Update, October 2025: Jobs(Washington, DC: World Bank, 2025-10-07)GDP growth in the East Asia and Pacific (EAP) region remains above the global average but is projected to slow down in 2025 and even further in 2026. The sluggishness is due to a less favorable external environment—rising trade restrictions, easing but still elevated global uncertainty, and slowing global growth—as well as persistent domestic difficulties. Today, many people are in low-productivity or informal jobs, and many of the young cannot find any jobs. The class of people vulnerable to falling into poverty is now larger than the middle class in most countries. In a region that thrived because export-oriented, labor-intensive growth created more productive jobs, firms must deal with higher tariffs and workers must contend with the growing use of robots, AI and digital platforms. More productive jobs would be created by reforms to enhance economic opportunity, human capacity and their virtuous interplay.Publication Bangladesh Development Update, October 2018(World Bank, Washington, DC, 2018-10)Strong growth, driven by consumption and public investment, has continued. Macroeconomic stability is strained. Inflation has picked up, driven by food price increases initially and by non-food inflation more recently. Notwithstanding rebound in garment exports and remittances, the current account deficit has widened significantly because of a surge in imports. A large increase in the disbursement of medium and long-term loans helped contain pressure on foreign exchange reserves and moderate the depreciation of the exchange rate. Monetary growth has been subdued because of decline in public sector borrowing from banks and reduced net international reserves, creating room for increased private sector credit growth. However, weak deposit growth and the persistence of high levels of non-performing loans have led to rise in lending rates. The fiscal deficit has increased despite underspending on public investment as revenue growth fell well short of the budget target. Excessive reliance on expensive saving instruments to finance the budget deficit has continued.Over the near-term, growth is expected to remain resilient, underpinned by strong domestic demand. Inflation is likely to accelerate with rising aggregate demand resulting in part from election related increase in private spending, an expansionary fiscal policy and depreciating exchange rate. The current account deficit and the fiscal deficits are projected to widen, but the risks of both external and public debt distress are low. Downside risks include fiscal slippages aggravated by drying up of assistance for supporting the Rohingyas, delays in banking reforms, loss of monetary policy predictability due to diminished central bank independence and weakening reform momentum in the run-up to the elections. Moving forward, creating more and better jobs by boosting private investments, diversifying exports and building human capital remain the top most policy priorities. In addition to handling macroeconomic imbalances through increased flexibility in the exchange rate and interest rates, this would require ensuring a predictable and efficient system of business regulation, faster progress on the implementation of the mega infrastructure projects, improving financial sector governance, and ensuring an adequate and reliable supply of electricity.Publication Digital Africa(Washington, DC: World Bank, 2023-03-13)All African countries need better and more jobs for their growing populations. "Digital Africa: Technological Transformation for Jobs" shows that broader use of productivity-enhancing, digital technologies by enterprises and households is imperative to generate such jobs, including for lower-skilled people. At the same time, it can support not only countries’ short-term objective of postpandemic economic recovery but also their vision of economic transformation with more inclusive growth. These outcomes are not automatic, however. Mobile internet availability has increased throughout the continent in recent years, but Africa’s uptake gap is the highest in the world. Areas with at least 3G mobile internet service now cover 84 percent of Africa’s population, but only 22 percent uses such services. And the average African business lags in the use of smartphones and computers as well as more sophisticated digital technologies that catalyze further productivity gains. Two issues explain the usage gap: affordability of these new technologies and willingness to use them. For the 40 percent of Africans below the extreme poverty line, mobile data plans alone would cost one-third of their incomes—in addition to the price of access devices, apps, and electricity. Data plans for small- and medium-size businesses are also more expensive than in other regions. Moreover, shortcomings in the quality of internet services—and in the supply of attractive, skills-appropriate apps that promote entrepreneurship and raise earnings—dampen people’s willingness to use them. For those countries already using these technologies, the development payoffs are significant. New empirical studies for this report add to the rapidly growing evidence that mobile internet availability directly raises enterprise productivity, increases jobs, and reduces poverty throughout Africa. To realize these and other benefits more widely, Africa’s countries must implement complementary and mutually reinforcing policies to strengthen both consumers’ ability to pay and willingness to use digital technologies. These interventions must prioritize productive use to generate large numbers of inclusive jobs in a region poised to benefit from a massive, youthful workforce—one projected to become the world’s largest by the end of this century.Publication Africa’s Pulse, No. 32, October 2025: Pathways to Job Creation in Africa(Washington, DC: World Bank, 2025-10-07)Economic growth in Sub-Saharan Africa is expected to increase from 3.5 percent in 2024 to 3.8 percent in 2025 and accelerate further to an annual average rate of 4.4 percent in 2026–27. Improved terms of trade are helping to stabilize local currencies, but real income per capita is only set to rise slightly, leaving extreme poverty largely unchallenged. By 2050, the region is projected to have over 620 million more working-age individuals. This demographic shift calls for innovative and transformative approaches to job creation, as current growth doesn't significantly lead to wage employment. To tackle these issues, foundational infrastructure and skills, a favorable business environment, and good governance are essential. Addressing the constraints to the private sector development opens the door for productive sectors of the economy to grow and generate quality employment, including but not limited to agribusiness, tourism, and healthcare, among others. With the right approach, Sub-Saharan Africa can establish a vibrant job market. This would help meet the needs of its growing labor force.Publication Taking Stock, September 2025: Special Focus : Nurturing Viet Nam’s High-tech Talents(Washington, DC: World Bank, 2025-09-04)Following strong momentum in the first half of 2025, driven by front-loaded exports, the Vietnamese economy is expected to moderate over the remainder of the year as export growth normalizes, with a forecast real GDP growth of 6.6 percent in 2025. As an export-oriented economy, Viet Nam remains vulnerable to slower global growth and softening demand from major trading partners. Trade-policy uncertainty may also begin to weigh on business and consumer confidence. Over the medium term, growth is projected to ease to 6.1 percent in 2026 before rebounding to 6.5 percent in 2027, supported by a recovery in global trade and Viet Nam’s continued appeal as a competitive manufacturing base. To support growth and hedge against external uncertainty, the report recommends a focus on scaling up public investment, mitigating financial-sector risks, and advancing structural reforms. The special focus of this edition titled Nurturing Viet Nam’s High Tech Talents” highlights the need to build a skilled talent base that can support and accelerate the country’s innovation ecosystem. Achieving Viet Nam’s high tech ambitions and its goal of high income status by 2045 will require not only a broad and growing pipeline of young STEM graduates, but also a stronger core of experts who lead research, run laboratories, and turn ideas into market-ready products. The report highlights the potential to raise public and private R&D spending in Viet Nam, complementing broader business enabling reforms. Total R&D spending in Viet Nam remains lower than more developed regional peers. There is scope to increase PhD-level faculty to grow the pipeline of advanced-degree graduates and high-caliber researchers. Strengthening university–industry-government linkages could catalyze the development of a work-ready workforce and promote technology transfer and knowledge spillovers.