Posted April 1st 2011 at 2:43 pm by
in Colombia Political Economy

Do Foreign Firms Crowd Out Local Firms in Colombia?

Ben Hyman is a Masters candidate in the MIT Department of Urban Studies and Planning. He is researching the Colombian economy.

I want to understand whether foreign firms out-compete local firms in Colombia. In an effort to answer my question, I made some maps that examine the spatial patterns of domestic and foreign firm profits in Colombia from 1995 to 2009. Watch the patterns unfold year by year below. On the left, darker blue colors represent higher domestic firm profits, while on the right, darker red colors represent higher foreign firm profits.

We expect that as foreign firm profits increase in one region or city, neighboring region domestic firms feel the pressure from the more competitive foreign firm which may seize its market. While it’s hard to assess exactly what’s going on since it is possible that as foreign firm profits increase, domestic firms increase but by less and less in surrounding regions, there are obvious implications for regional inequality here. In order to flesh out the inequalities, I will make an additional set of maps to show labor income payments (wages) by both foreign and domestic companies, which will be a better indicator of how wages are distributed regionally between domestic and foreign firms.

One thing that is clear from these maps: foreign investment is being registered in a limited number of regions that contain large metropolitan areas.

You can download a detailed pdf of the maps.

Post and images by Ben Hyman.

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