Growth slowdowns and the middle-income trap

Abstract

The "middle-income trap" is the phenomenon of hitherto rapidly growing economies stagnating at middle-income levels and failing to graduate into the ranks of high-income countries. In this study we examine the middle-income trap as a special case of growth slowdowns, which are identified as large sudden and sustained deviations from the growth path predicted by a basic conditional convergence framework. We then examine their determinants by means of probit regressions, looking into the role of institutions, demography, infrastructure, the macroeconomic environment, output structure and trade structure. Two variants of Bayesian Model Averaging are used as robustness checks. The results-including some that indeed speak to the special status of middle-income countriesare then used to derive policy implications, with a particular focus on Asian economies.

The Middle-Income Trap: Definitions, Theories and Countries Concerned—A Literature Survey

“…In addition, development organizations such as the World Bank (see e.g., Gill and Kharas, 2007;Agénor et al, 2012;Jimenez et al, 2012;Flaaen et al, 2013;Im and Rosenblatt, 2013) and the IMF (see e.g., Aiyar et al, 2013;Cherif and Hasanov, 2015) have drawn increasing attention to the MIT. The 2012 World…”

The Role of Total Factor Productivity Growth in Middle-Income Countries

“…Their finding suggests that many countries experienced slowdowns in two ranges of per capita income levels: one in the range of $10,000-$11,000 and another in the range of $15,000-$16,000. Numerous other studies made an empirical analysis identifying the MIT (Eichengreen, Park, and Shin 2012;Jankowska, Nagengast, and Perea 2012;Cai 2012;Aiyar et al 2013;Flaaen, Ghani, and Mishra 2013;Han and Wei 2015;Arias and Wen 2016). Some mathematical MIT models are recently introduced Dabús, Tohmé, and Caraballo 2016).…”

“…Im and Rosenblatt (2015) also could not see the difference for middleincome countries in terms of transitions across the intercountry distribution of income. The growth 3 According to Aiyar et al (2013), the "middle-income trap" refers to "the phenomenon of rapidly growing economies stagnating at middle-income levels and failing to graduate into the ranks of high-income countries." (Aiyar et al 2013, p. 3).…”

“…Along the same line, Aiyar et al (2013) specified the MIT as a particular event of growth slowdown, and suggested several determinants behind economic slowdown. They showed that the past growth slowdown in Latin America were mainly due to sharp declines in TFP growth, while the high growth in Asian Tigers, such as the People's Republic of China (PRC), and India can be explained by steady TFP growth.…”

Reforming Turkey s higher education system in order to attain high income, innovation driven, intellectual economy status

“…More specifically, middle-income trap is growth slowdowns that are identified as large sudden and sustained deviations from the growth path predicted by a basic conditional convergence framework (Aiyar 2013). …”