After Years of (Economic) Solitude: Neoliberal Reforms and Pay Inequality in Colombia By Laura Spagnolo and Daniel Munevar The University of Texas Inequality Project

This paper presents an analysis of the evolution of pay inequality in Colombia’s manufacturing sector from 1992-2004. Colombia’s implementation of economic reforms, including the opening of the economy and the financial liberalization that began in the early 1990s, were the main drivers of change in the structure of the manufacturing sector, provoking fluctuations in pay inequality. Changes in pay inequality appear intrinsically related to macroeconomic phenomena: while GDP and investment were growing, pay inequality in the manufacturing sector decreased; conversely, under recessionary conditions we observe increases in pay inequality in manufacturing. At the sectoral level, we observe the declining importance (in terms of employment, production, and valueadded) of labor-intensive, low-wage industries, and the rise of production in the highwage natural resource processing industries.