Economic Convergence, Capital Accumulation, and Income Traps: Empirical Evidence

Cyn-Young Park () and Rogelio Mercado

Review of Income and Wealth, 2020, vol. 66, issue 1, 26-58

Abstract: This paper examines the factors that increase the likelihood of economic transition to higher income status, thereby attempting to answer the question of why some economies move to a higher income country group while others do not. Using a quintile income distribution approach, we identify 62 economies that moved to a higher quintile income group in each decade from 1960s to the 2010s out of a sample of 182 economies. Our findings show that higher physical and human capital growth and oil revenues are significantly associated with a greater probability of transitioning to higher quintile income group, although their effects vary not only across income groups within a sample period but also across different periods. Our results indicate that economies that have attained substantial capital accumulation (either physical or human, or combination thereof) and/or are blessed with natural resources have avoided income traps and demonstrated a successful and often steady transition to higher income groups.

Date: 2020
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https://doi.org/10.1111/roiw.12398

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Working Paper: Economic Convergence, Capital Accumulation, and Income Traps: Empirical Evidence (2017)
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