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Revisiting Economic Growth in Colombia: A Microeconomic Perspective

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  • Arturo Harker
  • Marcela Melendez

Abstract

This paper revisits economic growth in Colombia using the growth diagnostics methodology proposed by Hausmann, Rodrik and Velasco (2005), to identify 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 the cost 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.

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Bibliographic Info

Paper provided by Inter-American Development Bank, Research Department in its series Research Department Publications with number 2006.

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Date of creation: Aug 2008
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Handle: RePEc:idb:wpaper:2006

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  1. Agenor, Pierre-Richard & Moreno-Dodson, Blanca, 2006. "Public infrastructure and growth : new channels and policy implications," Policy Research Working Paper Series 4064, The World Bank.
  2. Patrinos, Harry Anthony & Ridao-Cano, Cris & Sakellariou, Chris, 2006. "Estimating the returns to education : accounting for heterogeneity in ability," Policy Research Working Paper Series 4040, The World Bank.
  3. Carlos Esteban Posada & Miguel Urrutia Montoya, 2004. "Un Siglo de Crecimiento Económico," INVESTIGACIÓN ECONÓMICA EN COLOMBIA 003692, FUNDACIÓN PONDO.
  4. Peter S. Heller & Alan A. Tait, 1982. "International Comparisons of Government Expenditure," IMF Occasional Papers 10, International Monetary Fund.
  5. Eduardo Lora, 2009. "La Vulnerabilidad Fiscal del Gasto Social: ¿Es diferente América Latina?," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Economics Department, vol. 24(1), pages 3-20, Junio.
  6. Dany Jaimovich & Ugo Panizza, 2010. "Public debt around the world: a new data set of central government debt," Applied Economics Letters, Taylor and Francis Journals, vol. 17(1), pages 19-24.
  7. Hausmann, Ricardo & Klinger, Bailey, 2006. "Structural Transformation and Patterns of Comparative Advantage in the Product Space," Working Paper Series rwp06-041, Harvard University, John F. Kennedy School of Government.
  8. Lora, Eduardo & Olivera, Mauricio, 2007. "Public debt and social expenditure: Friends or foes?," Emerging Markets Review, Elsevier, vol. 8(4), pages 299-310, December.
  9. Arturo Harker & Marcela Melendez, 2008. "Revisiting Economic Growth in Colombia: A Microeconomic Perspective," Research Department Publications 2006, Inter-American Development Bank, Research Department.
  10. Mahdavi, Saeid, 2004. "Shifts in the Composition of Government Spending in Response to External Debt Burden," World Development, Elsevier, vol. 32(7), pages 1139-1157, July.
  11. Hélène Poirson & Luca Antonio Ricci & Catherine A. Pattillo, 2004. "What Are the Channels Through Which External Debt Affects Growth?," IMF Working Papers 04/15, International Monetary Fund.
  12. Carlos Felipe Prada, 2006. "¿Es rentable la decisión de estudiar en Colombia?," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE.
  13. Ricardo Hausmann & Bailey Klinger, 2008. "Growth Diagnostics: Perú," Research Department Publications 2005, Inter-American Development Bank, Research Department.
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Cited by:
  1. Arturo Harker & Marcela Melendez, 2008. "Revisiting Economic Growth in Colombia: A Microeconomic Perspective," Research Department Publications 2006, Inter-American Development Bank, Research Department.
  2. Alexander Cotte Poveda, 2011. "Economic development and growth in Colombia: An empirical analysis with super-efficiency DEA and panel data models," SERIE DE DOCUMENTOS EN ECONOMÍA Y VIOLENCIA 009080, CENTRO DE INVESTIGACIONES EN VIOLENCIA,INSTITUCIONES Y DESARROLLO ECONÓMICO (VIDE).
  3. Marcela Melendez & Guillermo Perry, 2010. "Industrial Policies in Colombia," Research Department Publications 4669, Inter-American Development Bank, Research Department.
  4. Ramón Espinasa, 2008. "Prospects for the Oil-importing Countries of the Caribbean," Research Department Publications 2007, Inter-American Development Bank, Research Department.
  5. Wald, Nina & Bozzoli, Carlos, 2011. "Bullet Proof? Program Evaluation in Conflict Areas: Evidence from Rural Colombia," Proceedings of the German Development Economics Conference, Berlin 2011 80, Verein für Socialpolitik, Research Committee Development Economics.
  6. Marcela Eslava & Marcela Melendez, 2009. "Politics, Policies and the Dynamics of Aggregate Productivity in Colombia," Research Department Publications 4633, Inter-American Development Bank, Research Department.

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