The Colombian economy was substantially transformed in the period 1985-2004. Indeed, after several years of a stable economic environment, characterized by isolation from world markets and moderate State intervention in the economy, the country engaged in a series of structural reforms from 1989, but especially in the periods 1990-94 and 2000-2004.

This report, conducted jointly by researchers in various countries, the Government and the World Bank, aims to address these questions not by focusing on labor market functioning, but on its outcomes. After all, the really important questions are not whether the labor market is overly informal or excessively rigid. What is central are labor market outcomes, such as adequate employment growth so that people can find gainful employment, acceptable worker productivity levels that are fairly compensated, and reasonable protection against shocks for workers and their families. This shift in focus, however, complicates the work. While one can study labor market functioning without paying too much attention to non-labor factors (e.g. payroll taxes), such approach is impossible when the subject of study is outcomes. Employment growth depends on macroeconomic factors at least as much as on labor regulations; productivity levels depend as much on investments in physical and human capital, as they do on labor market interventions; and protection against shocks depends as much on factors such as safety nets as it does on labor regulations. But this added complexity is necessary for a better understanding of the labor market. To simplify matters, the focus is on the most relevant relationships, between labor market institutions, its functioning, and outcomes. The report is structured accordingly.

The report will focus on four broad topics, in line with the goals stated above (i) main transformations in the labor market during the last 15-20 years, related to the variables of interest, such as unemployment, employment, hours, participation, wages, occupation, sectoral composition of employment and informality, among the most important. The analyses will focus on urban labor markets; (ii) adjustment of the labor market to the business cycle, emphasizing the factors that have constrained a more efficient adjustment; (iii) effects of labor market regulations on employment and productivity; and (iv) productivity growth (estimation and determinants).