Divergent Inequality Trajectories in Intermediate Cities: The Role of Income From Pensions and Transfers in Reducing Inequality

Abstract

In the last 18 years, Colombia has seen a modest reduction in income inequality compared to other Latin American countries as measured by the Gini index. However, when the scale is reduced and cities are observed, remarkably diverse trajectories are evident: some cities have had a notable reduction, while others have stagnated. This article focuses on four Colombian cities with divergent trajectories in the evolution of inequality. Through an analysis of income distribution using data from the Continuous Household Survey (2002-2005) and the Extensive Integrated Household Survey – GEIH by its Spanish acronym (2008-2018), and following the decomposition methodology suggested by Azevedo et al. (2013), this article focuses on the role of income from pensions and transfers in the variation of the Gini. Administrative records are used to mark the proposed analyses more robust. The results highlight the differentiated role of transfers in reducing inequality and that of pensions in increasing it.