Potential Costs to Asia of the Middle Income Trap

Kohli, Harpaul Alberto; Mukherjee, Natasha

doi:10.1177/097491011100300303

Cited by 18 publications

(16 citation statements)

References 15 publications

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“…When the supply of cheap labor inside their economies was eventually exhausted, and wages began to rise (i.e., trends similar to what we see in China today), a number of economic forces (e.g., globalization) began to change the organization of their economies (Kharas and Kohli 2011 ). Those at the lower end of the economic spectrum (e.g., workers with relatively low levels of human capital) suddenly found themselves being moved out of the (more) formal manufacturing sector, which was moving to lower-wage countries in other parts of the world (Kohli and Mukherjee 2011 ; Maddison 2003 ; Zhang et al 2013 ). This created a large group of laborers who did not have the skills necessary to contribute to the emerging skill-intensive and high-wage sectors in the economies and meant that these laborers were displaced into the informal sub-economy.…”

Section: Emergence Of Polarization In China’s Economymentioning

confidence: 99%

Moving Beyond Lewis: Employment and Wage Trends in China’s High- and Low-Skilled Industries and the Emergence of an Era of Polarization

et al. 2020

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One of the defining features of China’s economy over the two decades between 1995 and 2015 was the persistent rise of wages for workers and professionals in nearly every segment of the economy—with wage rates for labor-intensive jobs in manufacturing, construction, and the informal service sector rising the fastest. Recently, however, the economic environment in China has begun to change, including changes in both employment and wages. We identify recent employment/wage trends throughout China’s economy and postulate the sources of these trends as well as possible future consequences if they continue. We use official, nationally aggregated data to examine employment and wages in multiple sectors and industries. Our findings indicate that China may have entered a new phase of economic development in the mid-2010s. According to the data, in recent years, wage growth has begun to polarize: Rising for professionals employed in formal skill-intensive industries; and falling for workers in the informal labor-intensive service sector. We attribute this increase in skill-intensive wages to an increase in demand for skill-intensive employment, due to the emergence of a large middle class in China, for whom the demand for high technology, finance, banking, health, and higher education industries is increasing while, at least in the recent short term, the supply of experienced, high-skilled professionals has not kept up. The employment/wage trend in the informal (low-wage) service sector, however, is following a different pattern. While there is a rising demand for services in China’s economy, the growth, due to a number of factors (e.g., large shares of GDP targeted by policymakers to investment; high rates of savings by consumers), is relatively slow. In contrast, due to a number of economic forces, including globalization and automation, the supply of labor into the service sector of the informal economy is being fueled by the flow of labor out of manufacturing and construction (two industries that that have experienced employment declines since 2013). These supply and demand trends, in turn, are leading to the fall in the growth rate of wages in the informal service sector. We conclude by discussing the possible longer-term consequences of these emerging polarization trends based on an examination of recent experience with wage polarization occurring in both middle- and high-income countries, as well as its consequences. We also present policy recommendations for greater investment in education and human capital, as well as for the development of a more comprehensive set of social safety nets for different segments of China’s population.

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Section: Emergence Of Polarization In China’s Economymentioning

confidence: 99%

Moving Beyond Lewis: Employment and Wage Trends in China’s High- and Low-Skilled Industries and the Emergence of an Era of Polarization

et al. 2020

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“…Indeed, a number of Latin American countries were the fi rst to experience stagnation after reaching middle-income levels and failure to move further into the ranks of highincome countries. A number of works reveal the same threat to be currently looming large for many developing countries in other regions, notably in Asia (including China) (see, e.g., Grinin and Korotayev 2010a ;Kohli and Mukherjee 2011 ;Cai 2012 ;Kharas and Kohli 2011 ;Aiyar et al 2013 ). Note also that the mathematical model presented above in Appendix B also predicts a certain slow-down of the processes of Great Convergence in the forthcoming decades.…”

Section: Possible Global Implications Of the Convergence-divergence Pmentioning

confidence: 89%

Great Divergence and Great Convergence

Гринин

Korotayev

2015

130

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“…A number of works reveal the same threat to be currently looming large for many developing countries in other regions, notably in Asia (including China) (see, e.g. Grinin and Korotayev, 2010;Kohli and Mukherjee, 2011;Cai, 2012;Kharas and Kohli, 2011;Aiyar et al, 2013). The gap between the high-income and the low-income countries has also been decreasing lately, but at a much slower pace.…”

Section: Notesmentioning

confidence: 94%

On the structure of the present-day convergence

Korotayev

Zinkina

2014

Campus-Wide Information Systems

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Purpose -A substantial number of researchers have investigated the global economic dynamics of this time to disprove unconditional convergence and refute its very idea, stating the phenomenon of conditional convergence instead. However, most respective papers limit their investigation period with the early or mid-2000s. In the authors' opinion, some of the global trends which revealed themselves particularly clearly in the second half of the 2000s call for a revision of the convergence issue. The paper aims to discuss these issues. Design/methodology/approach -Several methodologies for measuring the global convergence/ divergence trends exist in the economic literature. This paper seeks to contribute to the existing literature on unconditional b-convergence of the per capita incomes at the global level. Findings -In the recent years, the gap between high-income and middle-income countries is decreasing especially rapidly. The gap between high-income and low-income countries, meanwhile, is decreasing at a much slower pace. At the same time, the gap between middle-income and low-income countries is actually widening. Indeed, in the early 1980s GDP per capita in the low-income countries was on average three times lower than in the middle-income countries, and this gap was totally overshadowed by the more than ten-time abyss between the middle-income and the high-income countries. Now, however, the GDP per capita in low-income countries lags behind the middle-income ones by more than five times, which is largely the same as the gap (rapidly contracting in the recent years) between the high-income and the middle-income countries. This clearly suggests that the configuration of the world system has experienced a very significant transformation in the recent 30 years.Research limitations/implications -The research concentrates upon the dynamics of the gap in per capita income between the high-income, the middle-income, and the low-income countries. Originality/value -This paper's originality/value lies in drawing attention to the specific changes in the structure of global convergence/divergence patterns and their implications for the low-income countries.Various aspects of convergence and the catch-up effect have attracted considerable scholarly attention, including the questions of unconditional (absolute) convergence vs conditional convergence; global convergence vs local or club-convergence;The current issue and full text archive of this journal is available at

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Potential Costs to Asia of the Middle Income Trap

Cited by 18 publications

References 15 publications

Moving Beyond Lewis: Employment and Wage Trends in China’s High- and Low-Skilled Industries and the Emergence of an Era of Polarization

Moving Beyond Lewis: Employment and Wage Trends in China’s High- and Low-Skilled Industries and the Emergence of an Era of Polarization

Great Divergence and Great Convergence

On the structure of the present-day convergence

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