Structural policies to boost productivity and inclusion in Costa Rica

Abstract

Owing to past structural reforms, Costa Rica has enjoyed robust GDP growth and productivity levels are gradually converging towards the OECD average. However, large GDP per capita and productivity gaps persist. In addition, not everyone has benefited from this growth. Inequality has increased and labour market conditions are a concern. Costa Rica has a lower share of employed workers in the population than almost all OECD countries, unemployment remains well above its pre-global-financial-crisis level, labour market participation has decreased and the share of informal jobs is high. Recognising these challenges, Costa Rica has accelerated its structural reform momentum recently, with policy reforms underway or planned in several areas that present win-win opportunities to boost both productivity and inclusion. These include efforts to tackle labour market informality, simplify the minimum wage structure, increase competition and reduce regulatory burdens. In addition to further reforms in these priority areas, structural policy improvements are also needed to increase outcomes and reduce inequalities in education and address significant transport infrastructure gaps.