Middle-income traps and complexity in economic development

Asano Takao (), Akihisa Shibata and Yokoo Masanori ()
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Asano Takao: Faculty of Economics, Okayama University, Tsushimanaka 3-1-1, Kita-Ku, Okayama 700-8530, Japan
Yokoo Masanori: Faculty of Economics, Okayama University, Tsushimanaka 3-1-1, Kita-Ku, Okayama 700-8530, Japan

Studies in Nonlinear Dynamics & Econometrics, 2023, vol. 27, issue 4, 553-565

Abstract: In this paper, we develop a simple multi-technology overlapping generations model that exhibits a wide variety of economic development patterns. In particular, our numerical simulations demonstrate that for a given set of parameter values, various types of development patterns such as the middle-income trap, the poverty trap, periodic or chaotic fluctuations, and high-income paths can coexist, and which pattern is realized depends only on the initial value of capital. For another set of parameter values, we show that, due to the pinball effect, an economy starting at a middle-income level can take off to the high-income state or get caught in the poverty trap in a seemingly random way after undergoing transient chaotic motions. Our results can explain observed complicated patterns of economic development in a unified manner.

Keywords: CES production function; chaos; complex dynamics; middle-income traps; nonlinearities; technology choice (search for similar items in EconPapers)
Date: 2023
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Working Paper: Middle-Income Traps and Complexity in Economic Development (2020)
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DOI: 10.1515/snde-2021-0100

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