Ebook Income Distribution, Human Capital And Economic Growth In Colombia
The increasing interest in the effects that private and social decisions have on the welfare of agents, has led us to reconsider the problem of income distribution, especially because in Colombia, as well as in the majority of Latin American economies, a recent and accelerated process of structural reforms based on trade liberalization has begun1.
Simultaneously, the traditional indicators of income distribution point to a sharp decay in income distribution, making it advisable question the positive relation between the trade liberalization process and the decay in income distribution, on which there is still no consensus (not even regarding the transmission channels).
On one hand, Sarmiento (1995) surveys the results that point to a negative effect of the “apertura” process (of the new model in general) in income distribution, while Lora and Steiner (1994), using a computable general equilibrium model CGE, find trade liberalization of little significance and tend to attribute the worsening of income distribution to exogenous factors like the fall in the price of coffee and the revaluation of the peso.
At the Latin American level, Londoño and Székely (1997) find evidence that physical capital accumulation has a positive effect on income distribution; they also confirm the link between the level of human capital and improvement in income distribution. According to them, an increase in income equality in the region is limited by the inequitable distribution of physical assets.
Following the work of Birdsall and Londoño (1997), higher initial wealth inequality matters for economic growth. As we will show later, this dependence on initial conditions roughly corresponds to the notion of ergodicity in economic development. Because this seems highly relevant for the Colombian economy, we need a model enabling us to study transitional characteristics in the context of non-ergodic economic growth like that of Durlauf (1993).
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