The Case of Colombia

BOX 5.3 Limited Policy Options for Lagging Regions When Migration Is Challenging: The Case of Colombia

Colombia’s territorial inequality is roughly twice as high as other Organisation for Economic Co-operation and Development (OECD) countries, and remedying the very persistent regional disparities has long flummoxed analysts. Incomes are high in the capital region, Cundinamarca, Antioquia—one of the three Latin American poles of industrialization identified by Hirschman (1958)—and Valle de Cauca (centered on the salsa capital, Cali). But monetary poverty is 3.7 times higher in the department of Choco on the Pacific coast than in Cundinamarca, while illiteracy is 5 times higher in the department of La Guajira.

Population groups in both lagging regions face cultural and educational challenges to migrating to more prosperous regions. Choco, famous as the home of the hip hop group ChocQuibTown, is largely Afro-Colombian, and the Wayuu of La Guajira are a weakly assimilated indigenous people.

On the other hand, both regions face challenges to local development. La Guajira, for example, is distant and largely desertic. Its indigenous inhabitants survive by herding goats, with some nascent tourism from its salt flats, flamingos, and coast. However, it is showing new potential with a plan to make the Latin desert bloom and develop. The Israeli government recently signed an accord with the government of Colombia to develop a “Guajira Verde” (Green Guajira) that would bring Israeli technology and know-how to both digging wells and introducing new crops, among them the date palm. In principle, the similarity of the region to the Negev desert offers La Guajira a road map and some notion of the cost-benefit analysis of the package of necessary complementarities, as well as the expertise to execute.

Choco enjoys a spectacularly rugged coastline, lindos cielos, with vast potential for tourism and an ample work force. However, it has limited infrastructure, low human capital, and weak governance capabilities. Hence, policy faces a difficult trade-off. A big push on several fronts may be poorly implemented and wind up an expensive failure, yet migration of a large share of the population also seems unlikely, while ongoing fiscal transfers would not be transitional, but an ongoing burden.

Source: https://caracol.com.co/programa/2019/10/12/al_campo/1570835764_116140.html.

of jobs through employment subsidies or incentives to relocate plants. Hence, an emerging literature formalized by Moretti (2010) and advanced by Bartik and Sotherland (2019) focuses on the potential of stimulating industries that export to other regions or abroad to create local jobs. As Bartik (2020) notes, subsidizing a new Burger King in a local area is likely to have a pure displacement effect since local demand cannot suddenly expand: it would only imply fewer burger jobs in the nearby McDonalds. Hence, the focus has been on generating jobs from tradables (products for which producers and consumers do not have to be in physical proximity to enable exchange), particularly exporting firms for which demand is, in theory, unlimited from the perspective of a typical open economy.

Estimates suggest that a 1 percent increase in jobs in tradable sectors created in the United States would generate a 1.5 percent to 2.5 percent increase in jobs in nontradable