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Re-examining the middle-income trap hypothesis (MITH): What to reject and what to revive?

Xuehui Han and Shang-Jin Wei

Journal of International Money and Finance, 2017, vol. 73, issue PA, 41-61

Abstract: Do middle-income countries face difficult challenges producing consistent growth? Using transition matrix analysis, we can easily reject any unconditional notion of a “middle-income trap” in the data. However, countries have different fundamentals and policies. Using a non-parametric classification technique, we search for variables that separate fast- and slow-growing countries. For middle-income countries, a relatively large working age population, sex ratio imbalance, macroeconomic stability, and financial development appear to be the key discriminatory variables. We do the same exercise for low-income countries. This framework yields conditions under which countries in the low- and middle-income ranges move forward or backward, or are trapped.

Keywords: Economic growth; Growth determinants; Middle-income trap; Infrastructure; Conditional inference regression tree (search for similar items in EconPapers)
JEL-codes: C14 C30 F01 F60 O11 O43 (search for similar items in EconPapers)
Date: 2017
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Working Paper: Re-examining the Middle-Income Trap Hypothesis (MITH): What to Reject and What to Revive? (2017) Downloads
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DOI: 10.1016/j.jimonfin.2017.01.004

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