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2013 OECD Economic Surveys: Colombia 2013

Economic Assessment

image of OECD Economic Surveys: Colombia 2013

OECD's 2013 Economic Survey of Colombia examines recent economic developments, policies, and prospects as well as taking a more detailed look at inequality and productivity and growth.

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Tackling income inequality

Income inequality has declined since the early 2000s but remains extremely high by international standards. Income dispersion largely originates from the labour market, which is characterised by a still high unemployment rate, a pervasive informal sector and a wide wage dispersion reflecting a large education premium for those with higher education. Wealth, and thus capital income, is also highly concentrated. The tax and system does little to reduce income inequality. It is small and dominated by non-redistributive transfer schemes, in particular contributory pensions, and consumption taxes which tend to be regressive. Moreover, the progressivity of income taxes has been undermined by generous tax reliefs, which benefit the well-off most and increase tax avoidance opportunities. Reducing income inequality is a key government objective. To achieve this, labour costs should be reduced and education quality should be raised so as to boost employment creation in the formal sector. The tax system should be reformed to enhance progressivity and raise more revenue which could be used to expand social policies.

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