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The concept of a ‘middle‐income trap’ has attracted enormous interest, but the existing literature lacks formal tests. We develop and apply a test of some necessary conditions for a country to be in a middle‐income trap that take into account short‐run dynamics, stochastic trends and structural breaks. We find that only seven countries satisfy our definition of a middle income trap.

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We develop a simple Malthusian growth model with continuous productivity growth and derive the stationary steady-state equilibrium. We show that linearization around the steady-state gives an empirically tractable model of Malthusian wage and population behaviour using the familiar concept of β -convergence. Our empirical strategy addresses the concern in the literature over model identification and inconsistent parameter estimates. Based on newly constructed population data, we estimate wage and population growth models using panel data for up to 17 countries from 900CE to 1870CE. Our results provide the first timeseries evidence of a strong Malthusian trap that was pervasive across countries and time before the 19 th century industrial revolution.

Numerous studies report the growth effects from labor reallocation in China to be in the order of 1-2 percentage points per year, which would appear to be a significant fraction of Chinas per capita income growth. We show that the total factor productivity gains are an order of magnitude smaller, at only 0.25 percentage points per year. There are two reasons for this difference. First, the majority of studies have used a decomposition method that effectively assumes linear production functions. This results in values that are much larger than the more appropriate Denison-Kuznets method. Second, we also allow for sectoral differences in human capital. We conclude that the gains from labor reallocation may have been a far less important source of Chinas growth than is conventionally thought.JEL Codes: O4, O41, O1Note: We are grateful for comments and suggestions from the anonymous referees, and from