Industrial policies in Colombia

"Latin American and Caribbean countries underperformance relative to other developing countries in terms of productivity growth has reflected on moderate average economic growth of the region over the last 15 years. Colombia is no exception".Política industrial, Productividad, Crecimiento económico, Colombia

Revisiting economic growth in Colombia. A microeconomic perspective

This paper revisits economic growth in Colombia using the growth diagnostics methodology proposed by Hausmann, Rodrik and Velasco (2005), with the purpose of identifying the most binding constraints for economic growth and the policies that, if implemented, can have the largest positive impact. To rank public policy priorities the HRV (2005) methodological approach is complemented with an econometric analysis of micro-data, aimed at exploring the impact that the various potential constraints to growth have had on firm-level investment decisions. The data shows economic reactivation in areas with falling violence. Results from analysis at the microeconomic level, however, give a particular spin to this conclusion by showing that investment decisions at the firm level are also explained by the restoration of some form of public order connected to the cessation of paramilitary violence and not only by the reduction of violence. From a public policy perspective, perhaps the most relevant result is the confirmation that in Colombia investment decisions are negatively affected by thecost of financing. Empirical results, robust across model specifications, single out the provision of access to financing at fair prices as a policy priority for economic growth, relevant across country regions and independent of whether uncertainties from poor protection to property rights are resolved.Crecimiento económico, Colombia

La infraestructura de transporte en Colombia

Este trabajo presenta una mirada detallada y crítica al sector de de infraestructura en Colombia con el ánimo de propiciar una discusión urgente y necesaria sobre un sector prioritario para el desenvolvimiento económico y el progreso social.Infraestructura del Transporte, Transporte, Infraestuctura Económica

Politics, Policies and the Dynamics of Aggregate Productivity in Colombia

This paper describes private actors' involvement in Colombia's policymaking process. While more transparent and formal channels are used to discuss horizontal policies, they are also less effective. The adoption of targeted policies, however, follows a faster track and depends more on political power than on those policies¿ potential as engines for productivity growth. Data on policies and political characteristics across sector-region units are used to further characterize the different groups¿ weight in policymaking, and the effect of the implied unbalance on aggregate productivity. Electoral weight and being represented by business groups and associations are found to be important determinants of the policy benefits received by a sector in a region, especially when activities are located in regions affected by armed conflict. It is also found that the resulting imbalance of policies damages aggregate productivity

Corporate Tax Stimulus and Investment in Colombia

This paper uses a yearly dataset of plant-level investment in Colombian firms during the period 1997 to 2007 to assess the impact of a tax incentive for firms that invest in fixed assets implemented in 2004. A positive and statistically significant correlation is found between the boom observed in investment and the adoption of the tax policy. However, the correlation vanishes when year-specific effects are controlled for. This result is robust to changes in the empirical specification, changes in estimation techniques, the inclusion of additional controls, and changes in the data set, among other tests. Overall, it is concluded that the tax stimulus analyzed was ineffective in promoting investment in Colombia

Industrial Policies in Colombia

This paper surveys and analyzes industrial policies in Colombia, finding extensive use of productive development policies (PDPs) and despite claims of only moderate government intervention. Rarely explicitly associated with the need to address market failures, PDPs are instead associated with economic reactivation and vaguely defined competitiveness. There are also PDPs that address government failures considered unlikely to be corrected by first-best interventions. Colombia has made progress, however, in structuring an institutional setting for PDP design that is sufficiently linked with private sector groups to elicit information on constraints and opportunities that require government intervention. Nonetheless, the overall set of PDPs in place still lacks coherence and is not always guided by the policy requests of the private sector more widely defined

Payroll Taxes and Labor Demand: Evidence from Colombia

Available evidence suggests that workers may have a low willingness or ability to pay for social security (via a reduction in their wage) and that this is particularly so for low-income workers. The end result is that social security contributions are borne by employers, effectively reducing the creation of employment in formal firms. This paper uses a firm-level panel dataset of the Colombian manufacturing sector for the period 1995-2007 to explore how the labor market has adjusted in response to payroll taxation. It provides empirical evidence about the evolution of effective payroll contributions and the composition of employment -skilled versus unskilled and temporary versus permanent employment- in Colombian manufacturing, and estimates the elasticity of formal labor demand to assess the incidence of payroll taxation on employment and the potential effect of transiting towards a universal social insurance funded out of general revenues.Labor Policy, Social Security, Workforce & Employment

Public Support to Innovation: The Colombian COLCIENCIAS' Experience

This paper aims at evaluating the impacts of innovation promotion programs administrated by the Colombian Innovation Agency (COLCIENCIAS). Although the agency implements multiple programs, the focus of these research are on those programs that provide financial incentives for R&D (matching grants and contingent loans) and at the same time encourage the formation of linkages between firms, universities and other public research organizations. Different from previous evaluations, a nice feature of the current research is the possibility to use a very rich dataset in order follow-up the economic performance of the beneficiaries over a long period of time. The results show that after controlling for both observable and unobservable difference with the control group, COLCIENCIAS programs have been very effective in increasing firm labor productivity and that the main channel behind this result is product diversification (product innovation)

Revisiting Economic Growth in Colombia: A Microeconomic Perspective

This paper revisits economic growth in Colombia using a growth diagnostics methodology to identify the most binding constraints for economic growth and the policies that, if implemented, can have the largest positive impact. The data shows economic reactivation in areas with falling violence. Results from analysis at the microeconomic level, however, give a particular spin to this conclusion by showing that investment decisions at the firm level are also explained by the restoration of some form of public order connected to the cessation of paramilitary violence. From a public policy perspective, perhaps the most relevant result is the confirmation that in Colombia, investment decisions are negatively affected by the cost of financing. Empirical results single out the provision of access to financing at fair prices as a policy priority for economic growth, independent of whether uncertainties from poor protection to property rights are resolved.

Middle-Class Entrepreneurs and Social Mobility through Entrepreneurship in Colombia

The paper uses microeconomic data to characterize entrepreneurs by income group and selected household, individual and business characteristics, finding that entrepreneurship is rare but more frequent in the upper class than the middle or lower classes. Middle-class entrepreneurs are, on average, better off than middle-class employees of similar characteristics but differ greatly from upper-class entrepreneurs in terms of educational attainment, the size of their businesses, and their outcomes. While entrepreneurs appear to have more income mobility than the average worker, this paper cannot establish whether this is true for middle-class entrepreneurs in particular, nor provide evidence to support the hypothesis that middle-class entrepreneurs' activity is an engine for economic growth. Instead, the findings suggest that the types of businesses run by these entrepreneurs are characterized by low productivity. Consequently, policies to increase social mobility seem to hold greater promise for promoting higher productivity and welfare than policies encouraging entrepreneurship.