Regional Inequality and Other Sources of Income Variation in Colombia

Excerpt] Regional inequality is of interest for a variety of reasons: planning development policies aimed at alleviating poverty and reducing personal inequality, gauging the degree of a country's labor market integration, understanding patterns of population movement in general and labor force migration in particular, predicting future urbanization, and characterizing the poor. Policymakers often aim development programs at particular target groups such as those living in certain regions of a country. In this paper we analyze the determinants of incomes and income inequality in one less developed country, Colombia, examining both personal and regional aspects. The results help clarify the potential of a development strategy emphasizing the poorest regions of the country. Our specific objectives are to measure the relative importance of personal and regional effects on income variation in Colombia and to determine within relatively homogeneous segments of the labor force how place of residence is associated with personal income levels and dispersion. In Section II we explore income differences across a number of dimensions (education, sex, age, type of employment, and region) with particular reference to regional inequality. We then turn, in Section III, to more formal procedures (analysis of variance and regression) for systematically analyzing the relationship between income and age, education, type of employment, and region, and for quantifying these effects. The paper concludes with some implications of the empirical findings.