We describe the patterns of economic growth and social progress in Colombian “functional territories". Unlike political/administrative divisions that emerge at least partly for historical reasons unrelated to economic interactions, functional territories reflect the patterns of spatial agglomeration and economic interactions in a territory. Using a novel definition of functional territories, our analysis reveals significant fragmentation of economic interactions: close to 66% of municipalities (holding about 20% of the country's population) have no significant links to neighboring areas. A set of comparatively more (but still only partially) integrated and more populous municipalities have stronger links between them. This rural-urban" space holds just around 31% of total population. The rest of Colombians are in urban" or Metropolitan" highly-populated and more integrated clusters. We describe these territories along two dimensions: economic growth or dynamism" and progress in social indicators or inclusion". To do so we propose a simple conceptual framework that organizes the diverse inputs that might help boost these outcomes. Larger and more urbanized agglomerations exhibit visible advantages in these inputs. Moreover, long-run institutional determinants best help differentiate territories. Consistent with this, larger and more urbanized agglomerations have better outcomes, especially when measuring economic activity. Also, more dynamic places tend to be the more inclusive ones, even though recent improvements in dynamism do not correlate with improvements in inclusion.

We study the nature of regional inequality in Colombia over the past 200 years. The main empirical fact is that regional inequality has been highly persistent despite the large changes that have taken place and the modernization of the society. We show that regional inequality is highly correlated with significant within-country differences in economic and political institutions, which are themselves highly persistent over the same period. We propose a tentative political economy theory of why the spatial distribution of institutions and economic outcomes has been so persistent over time.

La Encuesta Longitudinal Colombiana de la Universidad de los Andes tiene por objetivo seguir a lo largo de una década a más de 10 mil hogares en zonas urbanas y rurales en Colombia.

Despite a growing body of literature on how environmental degradation can fuel civil war, the reverse effect, namely that of conflict on environmental outcomes, is relatively understudied. From a theoretical point of view this effect is ambiguous, with some forces pointing to pressures for environmental degradation and some pointing in the opposite direction. Hence, the overall effect of conflict on the environment is an empirical question. We study this relationship in the case of Colombia. We combine a detailed satellite-based longitudinal dataset on forest cover across municipalities over the period 1990-2010 with a comprehensive panel of conflict-related violent actions by paramilitary militias. We first provide evidence that paramilitary activity significantly reduces the share of forest cover in a panel specification that includes municipal and time fixed effects. Then we confirm these findings by taking advantage of a quasi-experiment that provides us with an exogenous source of variation for the expansion of the paramilitary. Using the distance to the region of Urabá, the epicenter of such expansion, we instrument paramilitary activity in each cross-section for which data on forest cover is available. As a falsification exercise, we show that the instrument ceases to be relevant after the paramilitaries largely demobilized following peace negotiations with the government. Further, after the demobilization the deforestation effect of the paramilitaries disappears. We explore a number of potential mechanisms that may explain the conflict-driven deforestation, and show evidence suggesting that paramilitary violence generates large outflows of people in order to secure areas for growing illegal crops, exploit mineral resources, and engage in extensive agriculture. In turn, these activities are associated with deforestation.

This paper studies the effect of strengthening democracy, as captured by an increase in voting rights, on the incidence of violent civil conflict in nineteenth-century Colombia. Empirically studying the relationship between democracy and conflict is challenging, not only because of conceptual problems in defining and measuring democracy, but also because political institutions and violence are jointly determined. We take advantage of an experiment of history to examine the impact of one simple, measurable dimension of democracy (the size of the franchise) on conflict, while at the same time attempting to overcome the identification problem. In 1853, Colombia established universal male suffrage. Using a simple difference-indifferences specification at the municipal level, we find that municipalities where more voters were enfranchised relative to their population experienced fewer violent political battles while the reform was in effect. The results are robust to including a number of additional controls. Moreover, we investigate the potential mechanisms driving the results. In particular, we look at which components of the proportion of new voters in 1853 explain the results, and we examine if results are stronger in places with more political competition and state capacity. We interpret our findings as suggesting that violence in nineteenth-century Colombia was a technology for political elites to compete for the rents from power, and that democracy constituted an alternative way to compete which substituted violence.

The study of budgetary institutions has long been an important topic in the economic literature. Nonetheless, the degree of rigidity or inflexibility in budget preparation, a prime preoccupation for policy makers and in particular for finance ministers since a long time ago, has been relatively unexplored. In this paper we show that budget inflexibility can take several forms and argue that it is likely to be closely related to various types of political conflict present in the budget process. Moreover, we study one particular form of budget inflexibility and its connection with one specific (but perhaps the most important) political force driving the budget process. More specifically, we discuss some of the consequences of "expenditure inflexibility," defined as the existence of transfers to special interests enjoying constitutional or legal protection which impede their modification in the short run, in a simple model of legislative bargaining that captures the Tragedy of the Commons present in public budget allocation.

La explicación del ciclo económico fue uno de los intereses principales de los economistas en la primera mitad del siglo XX. Tal empeño dejó de ser prioritario en la agenda de la profesión entre fines de la segunda guerra mundial y el advenimiento del primer choque sobre los precios petroleros a mediados de los setenta. Desde entonces el ciclo económico volvió a ocupar una posición prominente en la investigación económica. Este ensayo destaca grandes líneas de investigación sobre el ciclo emprendidas a lo largo del siglo, se cita la controversia acerca de los eventuales cambios del ciclo en la segunda parte de la centuria anterior, y se introduce la discusión de los vínculos entre ciclos de diferentes economías. Este último tópico sirve de introducción al tema de las correlaciones entre ciclos de economías, y a su aplicación a las posibles correlaciones entre los Estados Unidos y Colombia durante el último siglo.

El gobierno colombiano tiene un escaso margen de maniobra al preparar el Presupuesto General de la Nación ya que un alto porcentaje de los gastos que debe hacer cada ano está predeterminado por un numeroso conjunto de leyes y de artículos constitucionales. En este trabajo se hace un diagnóstico sobre la magnitud y origen de la inflexibilidad" presupuestal, y se discuten posibles soluciones. La inflexibilidad compromete la capacidad de los representantes elegidos para ejecutar sus planes de gobierno, puede poner en peligro la estabilidad macroeconómica, favorece el exceso de apropiaciones por parte de grupos de interés, dificulta la posibilidad de llevar a cabo ajustes en situaciones fiscales deficitarias, dificulta la definición de prioridades, favorece la duplicidad de erogaciones para un mismo fin y le resta transparencia al proceso presupuestal. En buena medida, las inflexibilidades surgen del interés del legislativo de garantizar rentas específicas para determinados sectores y regiones, contrarrestar su falta de acceso formal al presupuesto y limitar la discrecionalidad del ejecutivo. Las medidas orientadas hacia la flexibilización aplicarían sanos principios presupuestales, reconocidos a lo largo de cien anos de historia de hacienda pública en Colombia. Para solucionar estos problemas, se sugiere modificar el esquema actual de asignación de transferencias y rentas de destinación específica, aplicar cabalmente el principio de unidad de caja en el presupuesto, establecer reglas de ahorro contingente para algunos fondos especiales, promover una administración unificada de la tesorería del estado, revivir los denominados "auxilios parlamentarios" con el fin de hacer explícita (poner por encima de la mesa) la búsqueda de presupuesto por parte del legislativo, y alejarlo de la práctica de incluir gastos por vía de leyes, como ha sido la tradición. El presupuesto anual debe partir de un límite de largo plazo al endeudamiento público, y una senda de disminución prefijada. Es necesario que el Ministerio de Hacienda se concentre en la definición del monto de gasto coherente con un nivel deseado de deuda pública, y que sean el Presidente y el Consejo de Ministros los responsables de la asignación sectorial, en interacción con el Congreso de la República."

During the nineties the performance of many emerging economies was linked to their access to foreign capital and its impact on the real exchange rate. Colombia was not an exception, as it experienced a sharp boom and bust cycle during the period.