Relative Wages, Skill Shortages, and Changes in Income Distribution in Colombia
An analysis of the income distribution relative to the economic growth in Colombia. Distribution of income in Colombia has been, and is, very unequal: 10 percent of the population of the large cities receives about half of the total personal income. This study examines the hypothesis that this inequality will widen if growth of the modern sector of the economy is retarded after the transition from agrarianism to the dual economy is begun. In Colombia, this increase in inequality resulted from the combined effect of an increase in unemployment, an increase in the wage differential between subsectors of the economy characterized by changing technology (modern) and subsectors where technology is static (traditional), and a rate of growth of employment in the modern subsectors that is less than in the traditional subsectors. The widening wage differential between the modern and traditional subsectors is a result of more intensive educational differences, and of differences in the competitive structure of the labor and product markets. This pattern of change of income distribution may alter if population growth is controlled, if export (hence import) capabilities are developed, and if labor force quality is upgraded to allow for modern subsector domination of the economy. 75 pp.