Market and public social spending: The unsettled agenda for equality in Colombia

Abstract

Colombia’s high concentration of income and the moderate economic performance are both explained, at least in some part, by the shortcomings of its fiscal policy. In this sense, this article points out that a robust fiscal policy, with greater social spending and greater tax collection, is essential to improve the distribution of income and contribute to greater economic growth. We maintain that there is no dilemma between a greater weight of the State in the economy and a greater strengthening of markets, nor a dilemma between growth or distribution. On the contrary, we provide theoretical and empirical evidence that supports the idea that greater economic equity favors greater and more stable economic growth. In this way, fiscal policy is able to improve the social conditions of the most vulnerable population not only by redistributing better the available resources, but also by making them larger in the long term.