Multi-dimensional Review of Panama

Volume 2: In-depth Analysis and Recommendations

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Panama has achieved socio-economic improvements in recent decades thanks to strong economic growth and consequent poverty reduction. Its growth model is characterised by a dual economy in which a small number of activities, including those related to the Canal and Special Economic Zones, have exhibited high productivity growth but limited job creation.

Panama should now embark on a new reform agenda to become a sustainable and inclusive high-income country. This report urges greater productivity in sectors that contribute to job formalisation to reduce disparities in income and among regions. As developing these policies requires further resources, taxation system and private sector involvement through public-private partnerships should also be reinforced. Focusing on skills and jobs, regional development and development financing, the volume provides analysis and recommendations on three areas which are key for Panama.



Building better skills and creating formal jobs for all Panamanians

OECD Development Centre

This chapter explores how labour markets can be a lever to help Panama increase equity and find a path towards inclusive growth. It argues that Panama’s dual labour market has been both the cause and a consequence of Panama’s large inequalities. Panama’s successful economic growth in the past decade has been based on a growth model that encompasses labour market inequality. While the productive tradeable service sector offers formal jobs for a few skilled workers; many low-skilled Panamanians are self-employed or informally employed in small, low-productive, non-tradeable service sector or agriculture firms. This chapter discusses a comprehensive policy package that would rebuild the social contract in Panama from a quality employment perspective. This chapter covers policies to strengthen education quality, endow workers with better skills, mitigate the perverse effects of labour informality and provide labour incentives to promote better quality jobs.



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