The middle income plateau: Trap or springboard?

Rauf Gönenç

No 1446, OECD Economics Department Working Papers from OECD Publishing

Abstract: The mixed growth performance of emerging market economies has revived angst about a "middle-income trap". However, a forensic review of statistical evidence shows that middle-income countries “escape” to higher income levels more often than both poorer and richer countries. At the same time, growth slowdowns are also more frequent in this group. Recent econometric research confirms that the impact of economic policies on GDP growth is greater at middle than at lower and higher income levels. Middle-income countries harvest higher returns from structural reforms, but also meet special political economy obstacles in implementing them. The resulting policy divergences imply differences in performance, reflecting notably the uneven expansion of their high-productivity entrepreneurial firms. The paper highlights the channels through which performance improves when obstacles to policy innovations are overcome and reforms are implemented.

Keywords: Economic growth; entrepreneurship; financial deepening; human capital; institutions; middle-income countries; productivity convergence; rule of law (search for similar items in EconPapers)
JEL-codes: B15 D02 E02 L26 O10 O17 P48 (search for similar items in EconPapers)
Date: 2017-12-12
New Economics Papers: this item is included in nep-ent and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:oec:ecoaaa:1446-en

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