The Middle-Income Trap: Myth or Reality?

Greg Larson, Norman Loayza () and Michael Woolcock

No 104230, Research and Policy Briefs from The World Bank

Abstract: This note considers the most relevant literature and contends that, even if the ‘middle income trap’ is myth, it provides impetus for policy makers to reassess their strategies once the traditional sources of economic growth have diminished. Middle-income countries must find drivers of productivity, innovation, and competitiveness while strengthening the economic fundamentals that foster and stabilize growth. Reaching high-income levels is challenging, with a strong likelihood of growth slowdowns along the way. But stagnation is inevitable, and middle income countries must have patience to manage the transition responsibly, avoid pitfalls, and promote new opportunities.

Keywords: growth rates; endogenous growth; risks; capita income; rights; economic growth; technological progress; high taxes; production; capital accumulation; monetary economics; stabilization policies; income; empirical support; public sector; reduced inequality; property rights; gdp per capita; economic review; political rights; labor force; resource allocation; short-run growth; exports; policy circles; policy options; policy discussions; rural labor; low inflation; drivers; knowledge diffusion; factor accumulation; cyclical volatility; labor market; influence; per capita income; low-income countries; population growth; income growth; income inequality; democracy; productivity; debt; markets; technological innovations; income levels; labor; policy debate; efficiency; macroeconomic stabilization; taxes; ldcs; education systems; development research; human capital; technological change; capital; wages; policies; international trade; public expenditure; external conditions; financial crisis; long-run growth; competitiveness; growth literature; incomes; agriculture; m1; capital flows; growth models; private sector; middle class; economics; global recession; labor market rigidities; taxation; economic development; trade; rich countries; gdp; per capita income levels; theory; investment; growth regressions; risk; macroeconomic factors; comparative advantage; growth performance; poverty; crises; country characteristics; competitive markets; innovation; empirical evidence; law; growth theory; policy research; high growth; rapid growth; economic fundamentals; long run; innovations; inequality; macroeconomic stabilization policies; growth (search for similar items in EconPapers)
Pages: 4 pages
Date: 2016-03
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Citations: View citations in EconPapers (2)

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