On the Existence of a Middle‐Income Trap

Abstract

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.

Convergence Success and the Middle‐Income Trap

“…Woo (2012) defines middle-income countries as those with a per capita income between 20% and 55% of US per capita income (in 1990PPP dollars) between 1960and 2008. Bulman, Eden, and Nguyen (2017 specify the middle-income range as between 10% and 50% of US per capita GDP for the period 1960period -2008period (in 2005, while it is between 8% and 36% relative to US per capita income (in 2005 PPP dollars) in Ye and Robertson (2016).…”

Determinants of Foreign Direct Investment in Middle-Income Countries: New Middle-Income Trap Evidence

“…Indeed, there is no empirical evidence regarding the relationship between FDI inflows and the middle-income trap. Recent studies analyse either the growth slowdowns and the middle-income trap (Aiyar et al, 2013;Eichengreen et al, 2011;2013;Ye and Robertson, 2016), or the characteristics of the countries being stuck in the middle-income trap (Cai, 2012;Felipe et al, 2012;Kharas and Kohli, 2011;Lee, 2013;Paus, 2012;, or finally suggest public policies that could be implemented by countries in order to avoid the middle-income trap (Agénor et al, 2012;Griffith, 2011;Kharas and Kohli, 2011;Ohno, 2010;Woo, 2010;World Bank, 2010). We believe that since FDI constitute a crucial factor for economic growth, it is highly important to examine whether certain determinants of FDI could push middle-income countries to cross to highincome status, thus avoiding the middle-income trap.…”

Middle‐income countries: trapped or merely slowing?

“…For Agenor and Canuto (), the chosen bandwidth is between 5 and 45 per cent of the US per capita income, and countries demonstrate symptoms of MIT if they remain in this range from 1960 through 2009. Then, there is Ye and Robertson () who employ time series analysis to trace the time paths followed by the per capita incomes of selected countries. The ones that are trapped remain in an equilibrium state close to the middle of the world income distribution.…”