Costa Rica’s Growth Paradox

Can a country enjoy a relatively high growth rate for a quarter of a century and still be unable to reduce its poverty rate? That’s the case of my homeland, Costa Rica, which happens to have a critical presidential election on February 2.

For over 25 years Costa Rica’s growth rate has averaged 4.7 percent a year – one of the highest in Latin America – and yet the country’s poverty rate has been stuck at around 20 percent since 1994. Even worse, Costa Rica is one out of only three Latin American countries where inequality has risen since 2000.

Today, I’ve published a study looking at some of the causes. Even though Costa Rica has undergone a substantial liberalization process since the mid-eighties, the country’s economic model is still in significant ways based on a mercantilist system that is biased in favor of certain sectors of the economy at the expense of the poor. You can read the paper here.