Varieties of middle-income trap: heterogeneous trajectories and common determinants

Carlos Bianchi, Fernando Isabella (), Anaclara Martinis () and Santiago Picasso ()
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Fernando Isabella: Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía
Anaclara Martinis: Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía
Santiago Picasso: Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía

No 23-16, Documentos de Trabajo (working papers) from Instituto de Economía - IECON

Abstract: This work analyses trajectories of structural change of countries trapped in middle-income trap (MIT) in a comprehensive manner from both the supply and the demand sides. First, it provides evidence that there is a regular trapping mechanism determined by the interaction between external demand constraints and the level of complexity of the economies. External constraint operates since MIT countries depend on exogenous prices to grow. Meanwhile, that constraint relaxes as the complexity of production increases. Second, this paper uses indicators of economic complexity and proposes a novel identification of the countries’ trajectories. A typology of the varieties of MIT is built according to the level of complexity of country economies and the relatedness between their current productive structure and more complex goods. It shows that having reached certain levels, further increases in supply complexity require a deepening of structural change through unrelated diversification.

Keywords: middle-income trap; structural change; external restriction; economic complexity (search for similar items in EconPapers)
JEL-codes: L16 O14 O40 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2023-09
New Economics Papers: this item is included in nep-hme, nep-lam and nep-tid
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https://hdl.handle.net/20.500.12008/41727

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Persistent link: https://EconPapers.repec.org/RePEc:ulr:wpaper:dt-16-23

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