1. The Middle-Income Trap Turns Ten
- Author
-
Gill, Indermit S. and Kharas, Homi
- Subjects
TRADE LIBERALIZATION ,ECONOMIC PERFORMANCE ,INVESTMENT ,GROWTH RATES ,FOREIGN INVESTORS ,MIDDLE- INCOME COUNTRIES ,DEMOGRAPHIC ,VALUE ADDED ,GROWTH MODELS ,ECONOMIC GROWTH ,STARTUPS ,EXCHANGE RATES ,EXTERNALITIES ,FINANCIAL SECTOR ,SAFETY NETS ,ADVANCED COUNTRIES ,UNEMPLOYMENT ,INCOME ,INVESTMENTS ,PRODUCTIVITY ,FEDERAL RESERVE ,MIDDLE-INCOME COUNTRY ,TRADE NEGOTIATIONS ,ECONOMIC STRUCTURES ,CAPITAL INVESTMENTS ,FINANCIAL CRISIS ,URBANIZATION ,POLITICAL POWER ,COMPETITIVENESS ,WORLD DEVELOPMENT INDICATORS ,ADVANCED COUNTRY ,INCENTIVES ,INVESTORS ,PER CAPITA INCOME ,GOODS ,GROWTH THEORY ,CLOSED ECONOMIES ,ENTRY POINT ,RENT ,TRADE POLICY ,RAPID GROWTH ,RISK MANAGEMENT ,TECHNOLOGICAL CHANGE ,ECONOMIC OUTLOOK ,FINANCIAL MARKETS ,CAPITAL INVESTMENT ,EMERGING ECONOMIES ,FOREIGN DIRECT INVESTMENT ,INCOMES ,DEVELOPMENT ECONOMICS ,DEMOCRACY ,MARKETS ,INSTITUTIONAL CAPACITY ,WAGE GROWTH ,LOW-INCOME COUNTRIES ,DEVELOPMENT ,MIDDLE- INCOME COUNTRY ,INTERNATIONAL FINANCE ,ENVIRONMENTAL SUSTAINABILITY ,PRICES ,WAGES ,PROPERTY RIGHTS ,DEREGULATION ,BANKING ,NATIONAL INCOME ,LABOR MARKET ,CARBON EMISSIONS ,BALANCE SHEET ,INFRASTRUCTURE INVESTMENTS ,MONETARY POLICY ,ELASTICITY ,INDUSTRIALIZATION ,TOTAL FACTOR PRODUCTIVITY GROWTH ,STRUCTURAL CHANGE ,GDP PER CAPITA ,LIQUIDITY ,THEORY ,DEVELOPMENT POLICY ,TRENDS ,PATENTS ,INCOME LEVELS ,MACROECONOMIC PERFORMANCE ,TRADE ,DIVIDEND ,SUSTAINABLE DEVELOPMENT ,PER CAPITA INCOMES ,PROTECTIONISM ,ECONOMIC DEVELOPMENT ,CENTRAL BANK ,ECONOMIC RENTS ,AGRICULTURE ,MIC TRAPS ,FREE TRADE ,PRODUCTIVITY GROWTH ,MARKET PRICES ,CAPITAL FLOW ,ECONOMIC PROGRESS ,WTO ,GDP ,VARIABLES ,MIDDLE-INCOME ECONOMIES ,MACROECONOMIC MANAGEMENT ,CUSTOMERS ,CAPITAL ,ECONOMIC GEOGRAPHY ,BANKRUPTCY ,OPEN ECONOMIES ,POLITICAL ECONOMY ,EXCHANGE ,LIBERALIZATION ,GROWTH POTENTIAL ,EFFICIENT CAPITAL ,VALUE ,EXPORTS ,FOREIGN MARKETS ,KNOWLEDGE ECONOMY ,MIDDLE- INCOME ECONOMIES ,CAPITAL MARKETS ,GOVERNANCE ,BENCHMARK ,INTERNATIONAL TRADE ,BENCHMARKS ,GLOBAL ECONOMIC PROSPECTS ,DECENTRALIZATION ,REGIONAL INTEGRATION ,CURRENCY RISK ,EXCHANGE RATE ,HUMAN CAPITAL ,CURRENCY ,PRICE ,SOCIAL SAFETY NETS ,TAXES ,EQUITY ,ECONOMIC DEVELOPMENTS ,INTELLECTUAL PROPERTY ,FLEXIBLE EXCHANGE RATES ,MARKET CONDITIONS ,CAPITAL ACCOUNT ,MIDDLE INCOME COUNTRIES ,ECONOMY ,COMPETITION ,PUBLIC POLICY ,GROWTH RATE ,DEVELOPING COUNTRIES ,UNEMPLOYMENT RATES ,FUTURE ,MONEY MARKET ,VENTURE CAPITAL ,MIDDLE-INCOME COUNTRIES ,GROWTH THEORIES ,INSTITUTIONAL INFRASTRUCTURE ,GLOBALIZATION ,LABOR MARKETS ,EXPECTATIONS ,REAL ESTATE ,ECONOMICS ,BARRIERS ,INTEREST ,EXTERNAL FINANCE ,TRADE DIVERSION ,COMPARATIVE ADVANTAGE ,CAPITAL ACCUMULATION ,NATURAL RESOURCES ,SOCIAL CAPITAL ,TOTAL FACTOR PRODUCTIVITY ,SHARE ,ECONOMIC RESEARCH ,VOLATILITY - Abstract
Since we introduced the term “middle-income trap” in 2006, it has become popular among policy makers and researchers. In May 2015, a search of Google Scholar returned more than 3,000 articles including the term and about 300 articles with the term in the title. This paper provides a (non-exhaustive) survey of this literature. The paper then discusses what, in retrospect, we missed when we coined the term. Today, based on developments in East Asia, Latin America, and Central Europe during the past decade, we would have paid more attention to demographic factors, entrepreneurship, and external institutional anchors. We would also make it clearer that to us, the term was as much the absence of a satisfactory theory that could inform development policy in middle-income economies as the articulation of a development phenomenon. Three-quarters of the people in the world now live in middle-income economies, but economists have yet to provide a reliable theory of growth to help policy makers navigate the transition from middle- to high-income status. Hybrids of the Solow-Swan and Lucas-Romer models are not unhelpful, but they are poor substitutes for a well-constructed growth framework.
- Published
- 2015