The Contribution of Development Factors to Economic Growth on Various GDP Levels – The Middle-Income Trap

Abstract

This paper analyses the intensity of the influence of foreign direct investments, exports of goods and services, and research and development expenditure on GDP growth of developed and developing countries. Panel regression analysis determined that the exports of goods and services make the largest contribution to growth on middle levels of income. In fact, the contribution the export of goods and services makes to growth on middle levels of income is two times larger than in countries with a high GDP. The most essential impact on countries with a high GDP level was made by research and development expenditure, which is 3.5 times larger than its impact on the developing Balkan countries. The phenomenon of the Middle-Income Trap can be explained by insufficient research and development expenditure. Foreign direct investments are not statistically significant for the GDP growth of observed countries, but they achieve far better results on low development levels. The empirical data, presented in figures, confirms the conclusions of the econometric analysis.