**Table 4.  Incidence** **<u>of Social Transfer Programs</u>**

||Poor|Distrib<br>est ←|ution of S<br> Quintile|ubsidy<br>→ Ric|hest|Relati<br>Poor|ve increa<br>est ←|se in hou<br> Quintile|sehold i<br>→ Ri|ncome<br>chest|
|---|---|---|---|---|---|---|---|---|---|---|
||1.|2.|3.|4.|5.|1.|2.|3.|4.|5.|
|Familias en Acción(CCT)|44.9|29.5|16.1|8.2|1.3|7.6|1.9|0.6|0.2|0.0|
|PPSAM|37.2|24.6|20.2|12.3|5.6|1.7|0.4|0.2|0.1|0.0|
|Pensiones|0.1|0.2|2.3|11.1|86.3|0.2|0.3|1.9|5.2|11.0|
|Familias Guardabosques|42.3|30.8|11.4|10.2|5.2|0.8|0.2|0.0|0.0|0.0|
|Subsidio Familiar CCF|1.9|12.8|21.7|31.7|31.9|0.2|0.4|0.4|0.3|0.1|
|**Total Monetary Transfers**|**3.1 **|**2.6**|**3.8**|**11.5**|**79.0**|**12.9**|**4.0**|**3.5**|**6.0**|**11.1 **|

Source: Nuñez (2009) using 2008 ECV data.

36. **Transfers to the pension system represent one of the largest expenditure items in the national budget.** In 2010, the central government spent COP 18,232 billion (about US$10 billion) or 3.4 percent of GDP (net) on pension transfers. This represents one fifth of total central government spending or about 65 percent of the revenue that is collected by Colombia‟s most important revenue source – the value added tax. The amount is also equivalent to the record high net foreign direct investment that Colombia received in 2011.

37. **Despite substantial fiscal outlays pension coverage is remarkably low in Colombia** . By 2009, only 23 percent of the pension age population received a pension (about 1.4 million people). This compares to coverage rates of 80-90 percent in countries such as Argentina, Brazil, Chile, and Uruguay.<sup>23</sup> As a result, pensions play a much smaller role in reducing poverty in Colombia compared to these countries. Meanwhile, about 33 percent of the labor force contributes towards a pension, but in order to earn one workers must contribute for sufficiently long periods or else their pension contributions will be returned without interest.

38. **The Conditional Cash Transfer program (CCT), and other social programs, have a compensatory impact on income inequality** . The combined impact of social transfer program is to reduce the Gini coefficient by 0.57 percentage points with the _Familias en Accion_ CCT program accounting for 0.39 points. Transfers are largely progressive in all programs, and poor families benefit the most. The CCF family subsidy, financed by formal labor payroll taxes, is an important exception as the rich receive most of the transfers.

39. **Well-targeted cash transfers to the poor demonstrate that inequality reduction can be achieved with a relatively small fiscal outlay.** In 2010, there were about 2.7 million beneficiary families of the CCT program (about 17 percent of the population).<sup>24</sup> The fiscal cost of the transfer program is equivalent to 0.3 percent of GDP – about a tenth the size of pension transfers (Nuñez, 2011). The CCT program is very well targeted towards the poorest 40 percent of the population, which receive about three quarters of money. The poorest quintile, in particular, receives about half (45 percent) the transfers.

40. **Public monetary transfers have an important impact on the incomes of the richest and poorest quintiles of the population, but less on the middle of the income distribution.** An alternative way to look at monetary transfers is to analyze their relative impact on household

> 23 Source: Rofman and Oliveri (2012).

> 24 Source: Espinosa (2011).

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