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Towards Sustainable Peace, Poverty Eradication, and Shared Prosperity

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Towards Sustainable Peace, Poverty Eradication, and Shared Prosperity Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized TOWARDS SUSTAINABLE PEACE, SUSTAINABLE TOWARDS POVERTY ERADICATION, AND ERADICATION, POVERTY SHARED PROSPERITY Colombia Policy Notes Policy Colombia September 2014 September TOWARDS SUSTAINABLE PEACE, POVERTY ERADICATION, AND SHARED PROSPERITY Colombia Policy Notes September 2014 © 2014 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202–473–1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 17 16 15 14 This work is a product of the staff of The World Bank with external contributions. The findings, in- ter- pretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. Rights and Permissions This work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) http://creativecommons.org/licenses/by/3.0/igo. Under the Creative Commons Attribution li- cense, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Attribution—Please cite the work as follows: World Bank. 2014. Colombia Policy Notes: Toward Sustainable Peace, Poverty Eradication and Shared Prosperity. Washington, DC: World Bank. License: Creative Commons Attribution CC BY 3.0 IGO Translations—If you create a translation of this work, please add the following disclaimer along with the attribution: This translation was not created by The World Bank and should not be considered an official World Bank translation. The World Bank shall not be liable for any content or error in this translation. All queries on rights and licenses should be addressed to the Communications Associate, María Clara Ucros, World Bank, Bogotá, Colombia; fax: (57–1) 326–3480. Graphic design: Robert Reineke CONTENTS Acknowledgements ............................................................................................. xi Acronyms ......................................................................................................... xii An Overview of World Bank Policy Notes for Colombia ..........................................xvii Three development objectives.......................................................................................xviii Transition to sustainable peace ............................................................................................ xviii Fast poverty reduction but persistent inequality ..........................................................................xx Recent economic growth has brought shared prosperity. Is it sustainable? .....................................xxi Nine policy areas ...........................................................................................................xxiii Organizing the territory .......................................................................................................xxiv Improve rural areas first ......................................................................................................xxiv Make cities more connected and productive .............................................................................xxvi Manage disaster risks better ...............................................................................................xxviii Strive for environmental sustainability ................................................................................... xxx Marshalling all forms of capital: infrastructure, finance and innovation.....................xxxii Close the infrastructure gap ................................................................................................ xxxii More and better financial services for all ...............................................................................xxxv Make innovations thrive ....................................................................................................xxxvii Empowering people and localities .............................................................................xxxvii Tools for an integrated Social Protection System ..................................................................xxxviii Improve the decentralization process .........................................................................................xl Common threads ........................................................................................................... xlii Part One – Background Notes Chapter 1. Supporting Colombia’s Transition to Sustainable Peace and Development ............................................................................... 1 Main Messages .................................................................................................................. 2 The dynamics of armed conflict in Colombia ................................................................. 3 What does sustainable peace mean? ........................................................................................ 5 Understanding armed conflict and the transition to peace .............................................. 6 The transition to sustainable peace and development ................................................................... 7 Policies and programs for the three transitions ............................................................................ 9 Challenges for the Colombian government in the transition period .............................. 13 iv CONTENTS Political transition .............................................................................................................. 14 Security transition ................................................................................................................ 15 Development transition ......................................................................................................... 16 Endnotes ......................................................................................................................... 17 Chapter 2. Toward Shared Prosperity in Colombia ...............................................23 Main Messages ................................................................................................................ 24 Building the foundations of shared prosperity in Colombia: Recent trends in poverty, shared prosperity, and inequality .................................... 25 A decade of impressive poverty reduction ................................................................................ 25 Who and where are the poor in Colombia? .............................................................................. 27 More shared prosperity with reduction in inequality toward the end of the decade ........................ 30 The drivers behind the observed changes in poverty and inequality .............................. 32 Evaluating the dynamics of sources of income ......................................................................... 34 Understanding the sources of poverty reduction ........................................................................ 37 Understanding the sources of changes in inequality .................................................................. 39 Projecting future poverty incidence rates ................................................................................... 39 Final remarks ................................................................................................................... 41 Endnotes ......................................................................................................................... 42 References ....................................................................................................................... 43 Annex 1: Decomposing poverty reduction—The intra-sectorial effect versus the inter-sectorial effect ............................................................................................ 45 Annex 2: Typology of economic classes in Colombia .................................................... 46 Annex 3: Figures ............................................................................................................. 47 Annex 4: Main differences in methods for measuring poverty in Colombia .................. 50 Chapter 3. Structural Changes – Implications for Growth, Productivity, and Competitiveness ...............................................................................51 Main Messages ................................................................................................................ 52 Structural changes and growth dynamics ....................................................................... 54 Growth decomposition and productivity dynamics ..................................................................... 56 Growth at the regional level ................................................................................................... 62 Structural changes in international
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