Creating your own path to move beyond the middle-income trap: lessons from Korea

Abstract

The development experience observed in Korea has been a symbol of successful catch-up for several decades. This process allowed its upward transition from middle income to high-income status and has drawn the attention of many streams of scholars. More recently, emergent research has improved our understanding of this experience and its policy implications for developing countries (Lee, 2013; 2016; 2019). This paper proposes a review of what this literature has to say about the mechanisms behind the successful path followed by Korea and a discussion of lessons to overcome the middle-income trap. It is argued that latecomers do not limit themselves to follow the path of technological development of the advanced countries and that alternative paths are possible. The main policy implication for latecomers is that a successful catch-up is possible yet difficult to achieve because it requires taking detours and leapfroging into new technologies.

Can the Development of Total Factor Productivity Help Middle-income Countries to Overcome the Middle-Income Trap?

“…Please note that this is not a "South-Korean Model fits all" scenario, rather series policies inspired from the South-Korean 5-years plans that had a positive effect on TFP [12]. These policies are worth exploring for current MICs to seek to overcome the MIT.…”

“…Based on the empirical research drawn from the EU KLEMS dataset, Oulton thinks that capital's role in the growth processes is also directly correlated with the elasticity of output with respect to capital. This associates with the idea of allocation of resources [12]. From Oulton's model it can be inferred that in the free-market, the levels of investments and labor are being allocated to projects that will deliver the most marginal product (reward).…”