Theoretical Modeling and Empirical Analysis of the Middle-Income Trap

Zong Liang
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Zong Liang: Bank of China

Chapter Chapter 7 in The Innovation of Economic Theory in China, 2026, pp 271-337 from Springer

Abstract: Abstract The Middle-Income Trap (MIT) refers to the situation where a country’s development prospects may diverge after reaching the middle-income stage (with a per capita GDP of approximately USD4000). The outcomes could be either continued development toward becoming a developed country or economic stagnation leading to the MIT. Therefore, studying the MIT is crucial. Practically, it affects the future of many developing economies and consequently the global economic outlook. Theoretically, existing literature lacks in-depth research on the MIT and fails to provide a theoretical model or scenario analysis. After over 40 years of rapid growth, China’s per capita GDP continuously exceeded USD10,000 in 2019–2020, nearing the standard of high-income countries. China has set a significant goal of reaching a moderately developed country status by 2035, providing a solid subject for theoretical research. This chapter will construct a theoretical model of the MIT based on its connotation and international experiences, reveal possible scenarios and conditions theoretically, and conduct empirical analysis to offer references for China and other economies to smoothly pass through the MIT and advance into the high-income country club.

Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-981-95-2713-7_7

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DOI: 10.1007/978-981-95-2713-7_7

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