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Colombia has the seventh highest Gini coefficient of income inequality in the world. The Santos Administration is aware of this challenge and is taking important measures to reduce disparities. The government is also aspiring to join the OECD, which exhibits much lower income disparities, mainly as a result of effective policies of fiscal redistribution. In Colombia, meanwhile, direct taxes, indirect taxes, and monetary transfers hardly dent the high Gini coefficient. To reduce income inequality, Colombian policy makers could consider introducing a more progressive tax-transfer system. This paper ranks alternative inequality-reducing fiscal policy options based on their effectiveness. It argues that there are potentially important redistributive potential gains available from tax reforms if combined with good spending decisions. It presents an illustrative reform package that would be sufficient for Colombia to reach levels of inequality similar to Chile or Costa Rica in a fiscally neutral manner. Nonetheless, further analysis is needed to explore all available policy options and identify those best suited for Colombia.

Debt Markets --- Economic Theory & Research --- Emerging Markets --- Fiscal policy --- Fiscal redistribution --- Inequality --- Macroeconomics and Economic Growth --- Poverty Reduction --- Social spending --- Subnational Economic Development --- Taxation --- Taxation & Subsidies --- Colombia

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This paper provides evidence from eight developing countries of an inverse relationship between poverty and city size. Poverty is both more widespread and deeper in very small and small towns than in large or very large cities. This basic pattern is generally robust to choice of poverty line. The paper shows, further, that for all eight countries, a majority of the urban poor live in medium, small, or very small towns. Moreover, it is shown that the greater incidence and severity of consumption poverty in smaller towns is generally compounded by similarly greater deprivation in terms of access to basic infrastructure services, such as electricity, heating gas, sewerage, and solid waste disposal. The authors illustrate for one country-Morocco-that inequality within large cities is not driven by a severe dichotomy between slum dwellers and others. The notion of a single cleavage between slum residents and well-to-do burghers as the driver of urban inequality in the developing world thus appears to be unsubstantiated-at least in this case. Robustness checks are performed to assess whether the findings in the paper are driven by price variation across city-size categories, by the reliance on an income-based concept of well-being, and by the application of small-area estimation techniques for estimating poverty rates at the town and city level.

Cities --- City Development Strategies --- Developing countries --- Economic change --- Economic performance --- Growth rates --- Poverty Reduction --- Regional Economic Development --- Rural Poverty Reduction --- Subnational Economic Development

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Fiscal responsibility laws are institutions with which multiple governments in the same economy-national and subnational-can commit to help avoid irresponsible fiscal behavior that could have short-term advantages to one of them but that would be collectively damaging. Coordination failures with subnational governments in the 1990s contributed to macroeconomic instability and led several countries to adopt fiscal responsibility laws as part of the remedy. The paper analyzes the characteristics and effects of fiscal responsibility laws in seven countries-Argentina, Australia, Brazil, Canada, Colombia, India, and Peru. Fiscal responsibility laws are designed to address the short time horizons of policymakers, free riders among government units, and principal agent problems between the national and subnational governments. The paper describes how the laws differ in the specificity of quantitative targets, the strength of sanctions, the methods for increasing transparency, and the level of government passing the law. Evidence shows that fiscal responsibility laws can help coordinate and sustain commitments to fiscal prudence, but they are not a substitute for commitment and should not be viewed as ends in themselves. They can make a positive contribution by adding to the collection of other measures to shore up a coalition of states with the central government in support of fiscal prudence. Policymakers contemplating fiscal responsibility laws may benefit from the systematic review of international practice. One common trait of successful fiscal responsibility laws for subnational governments is the commitment of the central government to its own fiscal prudence, which is usually reinforced by the application of the law at the national as well as the subnational level.

Access to Finance --- Affiliated Organizations --- Banks & Banking Reform --- Comparator Countries --- Debt Markets --- Economic Performance --- Law and Development --- Policy Environment --- Public Sector Economics --- Rule of Law --- Subnational Economic Development

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The extent to which local communities benefit from commodity booms has been subject to wide but inconclusive investigations. This paper draws from a new district-level database to investigate the local impact on socioeconomic outcomes of mining activity in Peru, which grew almost twentyfold in the last two decades. The authors find evidence that producing districts have better average living standards than otherwise similar districts: larger household consumption, lower poverty rate, and higher literacy. However, the positive impacts from mining decrease significantly with administrative and geographic distance from the mine, while district-level consumption inequality increases in all districts belonging to a producing province. The inequalizing impact of mining activity, both across and within districts, may explain part of the current social discontent with mining activities in the country, even despite its enormous revenues.

Economic Theory & Research --- Housing & Human Habitats --- Inequality --- Living standards --- Macroeconomics and Economic Growth --- Natural resource curse --- Poverty --- Poverty Reduction --- Regional Economic Development --- Rural Poverty Reduction --- Subnational Economic Development

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This paper provides evidence from eight developing countries of an inverse relationship between poverty and city size. Poverty is both more widespread and deeper in very small and small towns than in large or very large cities. This basic pattern is generally robust to choice of poverty line. The paper shows, further, that for all eight countries, a majority of the urban poor live in medium, small, or very small towns. Moreover, it is shown that the greater incidence and severity of consumption poverty in smaller towns is generally compounded by similarly greater deprivation in terms of access to basic infrastructure services, such as electricity, heating gas, sewerage, and solid waste disposal. The authors illustrate for one country-Morocco-that inequality within large cities is not driven by a severe dichotomy between slum dwellers and others. The notion of a single cleavage between slum residents and well-to-do burghers as the driver of urban inequality in the developing world thus appears to be unsubstantiated-at least in this case. Robustness checks are performed to assess whether the findings in the paper are driven by price variation across city-size categories, by the reliance on an income-based concept of well-being, and by the application of small-area estimation techniques for estimating poverty rates at the town and city level.

Cities --- City Development Strategies --- Developing countries --- Economic change --- Economic performance --- Growth rates --- Poverty Reduction --- Regional Economic Development --- Rural Poverty Reduction --- Subnational Economic Development