The poverty and distributional impact of "opening-up": Urban Colombia in the 1990s

This paper evaluates the poverty and distributional impacts of opening-up the Colombian economy in the early 1990s. Using a microsimulation, we examine how the liberalisation-induced changes on the urban labour market and relative goods price changes have shaped the distribution of income and how they ultimately affect poverty outcomes. We find (1) the adverse effects of increasing informality to be rather small (2) the increase in the unskilled-skilled wage-gap to have major negative distributional implications, (3) a strong favourable distributional impact of changes in relative prices for consumer goods, and (4) two factors related to a non-tradable boom, increasing female labour market participation and an increase in informal profits, to have considerably cushioned the possible adverse poverty effects of trade liberalisation.

Author

Jann Lay

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JEL Classification
F16, D31, C15