Avoiding Middle-Income Growth Traps

Pierre-Richard Agénor, Otaviano Canuto and Michael Jelenic ()
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Michael Jelenic: World Bank

World Bank - Economic Premise, 2012, issue 98, 1-7

Abstract: Since the 1950s, rapid growth has allowed a significant number of countries to reach middle-income status; yet, very few have made the additional leap needed to become high-income economies. Rather, many developing countries have become caught in what has been called a middle-income trap, characterized by a sharp deceleration in growth and in the pace of productivity increases. Drawing on the findings of a recently released working paper (Agénor and Canuto 2012), as well as a growing body of research on growth slowdowns, this note provides an analytical characterization of “middleincome traps” as stable, low-growth economic equilibria where talent is misallocated and innovation stagnates. To counteract middle-income traps, there are a number of public policies that governments can pursue, such as improving access to advanced infrastructure, enhancing the protection of property rights, and reforming labor markets to reduce rigidities—all implemented within a context where technological learning and research and development (R&D) are central to enhancing innovation. Such policies not only explain why some economies—particularly in East Asia—were able to avoid the middle-income trap, but are also instructive for other developing countries seeking to move up the income ladder and reach high-income status.

JEL-codes: E2 E6 G2 H0 H1 H2 H4 J0 J3 J5 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (50)

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Working Paper: Avoiding Middle-Income Growth Traps (2012)
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