Latin America and the middle-income trap

Eva Paus

Financiamiento para el Desarrollo from Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL)

Abstract: Promising economic growth during the 2000s obfuscates the reality that Latin American countries are facing the acute threat of a middle-income trap. In a review of the literature on the middle-income trap I distinguish two approaches to the middle-income trap: one focuses mainly on the lack of structural change, the driving forces behind it, and the national and global context in which it unfolds; the other stresses growth slowdowns irrespective of time and place. I offer an extension of the structural change approach with an emphasis on the implications of the current globalization process. A productive capabilities-focused analysis reveals serious gaps in social and firm-level capabilities in Latin America economies, though the magnitude differs across indicators and countries. The experiences of China and small latecomers trying to move from the middle to the high-income level (Chile, the Dominican Republic, Jordan, Ireland, and Singapore) suggest that a cohesive productive capabilities-focused development strategy holds out great promise for generating growth-enhancing structural change. I conclude with a discussion of the key challenges Latin American countries have to overcome for the successful implementation of such a strategy to avoid the middle-income trap.

Date: 2014-06
New Economics Papers: this item is included in nep-lam and nep-sea
Note: Includes bibliography.
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:ecr:col035:36816

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