How to avoid middle income traps ? evidence from Malaysia

Aaron Flaaen, Ejaz Ghani () and Saurabh Mishra

No 6427, Policy Research Working Paper Series from The World Bank

Abstract: Malaysia's structural transformation from low to middle income is a success story, making it one of the most prominent manufacturing exporters'in the world. However, like many other middle income economies, it is squeezed by the competition from low-wage economies on the one hand, and more innovative advanced economies on the other. What can Malaysia do? Does Malaysia need a new growth strategy? This paper emphasizes the need for broad structural transformation; that is, moving to higher productivity production in both goods and services. This paper examines productivity growth for Malaysia at the sectoral level, and constructs several measures of the sophistication of goods and services trade, and puts these comparisons in a global context. The results indicate that Malaysia has further opportunities for growth in the services sector in particular. Modernizing the services sector may provide a way out of the middle income trap, and serve as a source of growth for Malaysia into the future.

Keywords: Economic Theory&Research; Banks&Banking Reform; Emerging Markets; Labor Policies; Economic Conditions and Volatility (search for similar items in EconPapers)
Date: 2013-04-01
New Economics Papers: this item is included in nep-dev and nep-sea
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Citations: View citations in EconPapers (27)

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