Technical Note on Human Capital in Panama : Gains, Challenges, and Policy Options – Panama Poverty and Equity Assessment 2024

Overview & Synopsis

Panama has experienced remarkable economic growth over the past three decades, yet some of its most pressing challenges reflect deficiencies in human capital accumulation. With an average annual growth rate of nearly 6 percent, Panama has achieved the highest GDP per capita convergence to the United States in the region, reducing poverty from 50.2 percent in 1990 to 12.1 percent in 2019. However, Panama remains one of the most unequal countries in the world, and current labor market conditions and productivity levels do not ensure the sustainability of future growth (World Bank 2023). Inequality and low productivity rates are rooted in labor market dynamics. Most jobs created in the last decade have been of low quality and predominantly informal, with unequal access across population groups. These challenges reflect disparities in access to human capital, which are characteristics of low-income economies and not in line with the country’s GDP per capita (World Bank 2015; World Bank 2023; World Bank 2024). This note examines Panama’s progress, key drivers, and barriers to human capital development, building on previous international comparisons and highlighting existing inequalities within provinces. It draws on recent studies in the health and education sectors and updated data from INEC, the Ministry of Health, the Ministry of Education, the 2023 Population and Household Census, and the 2022 PISA tests. These sources offer insights into pre- and post-pandemic trends in education levels, employment, fertility decisions, and learning outcomes for new generations, as well as data on teachers and secondary schools. This analysis helps identify disparities across population groups and underscores the need for targeted policies to bridge these gaps.