Middle-income growth traps

Pierre-Richard Agénor and Otaviano Canuto

No 6210, Policy Research Working Paper Series from The World Bank

Abstract: This paper studies the existence of middle-income growth traps in a two-period overlapping generations model of economic growth with two types of labor and endogenous occupational choices. It also distinguishes between"basic"and"advanced"infrastructure, with the latter promoting design activities, and accounts for a knowledge network externality associated with product diversification. Multiple steady-state equilibria may emerge, one of them taking the form of a low-growth trap characterized by low productivity growth and a misallocation of talent -- defined as a relatively low share of high-ability workers in design activities. Improved access to advanced infrastructure may help escape from that trap. The implications of other public policies, including the protection of property rights and labor market reforms, are also discussed.

Keywords: Economic Theory&Research; Political Economy; Labor Policies; Economic Growth; Debt Markets (search for similar items in EconPapers)
Date: 2012-09-01
New Economics Papers: this item is included in nep-dge, nep-fdg and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

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