Poverty in Panama: Why Economic Growth is Not Enough

Judith Clara Dongus

Student thesis: Master thesis


This thesis analyzes the dynamics between economic growth and the reduction of poverty in Panama.
Following the understanding of neoclassical economic theory, economic growth is the main driver behind the
reduction of poverty. Panama has had some of the highest growth rates in the world. Directly correlating this
economic growth with the reduction of poverty, however, shows that Panama underperforms in decreasing
its poverty rates in comparison to other Latin American countries. Accordingly, growth does not reduce
poverty as successful in Panama as it does in other countries. To find out why this is the case, two social
science theories that show two different perspectives on poverty are combined. The ideas of neoclassical
economic theory and structural violence guide the analysis which is structured following the PIE-model. This
model is chosen as the framework to operationalize the two social science theories and gives an overview
over a society by considering the three subsystems- politics, institutions and the economy. The argument is
that only an eclectic approach allows to get a deep understanding of a complex issue such as poverty. This is
also why mixed methods are used. A field study in Panama allowed for an in-depth understanding of the
country’s society through 12 interviews.
It is concluded that there are two reasons for the uneven correlation between economic growth and the
reduction of poverty in Panama. One, the original trickle-down effect of neoclassical economic theory is too
simplistic. For wealth to be more evenly distributed, “good governance” needs to be assured. Second, there
is structural violence in Panama that keeps some people from participating in society and thereby take
advantage of the country’s economic wealth. Panama’s society is in a vicious circle where the elite contains
power over economic resources and institutions. This latter answer cannot be uncovered unless there is a
shift in paradigms of acknowledging that environmental factors can cause poverty as well. Accordingly, this
research implies that international development organizations and governments should broaden their
understanding of poverty and direct policies towards changing structures that keep people marginalized. It
is emphasized that a “one-size-fits-all” approach is not suitable and poverty should always be solved
accounting for the local context

EducationsMSc in Business, Language and Culture - Business and Development Studies, (Graduate Programme) Final Thesis
Publication date2017
Number of pages92
SupervisorsAndrew Crabtree