Learning from China's Rise to Escape the Middle-Income Trap : A New Structural Economics Approach to Latin America

Learning from China's Rise to Escape the Middle-Income Trap : A New Structural Economics Approach to Latin America

This paper discusses the causes of the middle-income trap in Latin America and the Caribbean, identifies the challenges and opportunities for Latin America that come from China's rise, and draws lessons from New Structural Economics and the Gr...

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Bibliographic Details
Main Authors:	Lin, Justin Yifu, Treichel, Volker
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2012
Subjects:	ACCOUNTING ADVANCED COUNTRIES ADVANCED COUNTRY ADVANCED ECONOMIES AFFILIATES AGRICULTURE BANK OF KOREA BANKING CRISES BANKING SUPERVISION BANKING SYSTEM BANKS BASE YEAR BENCHMARKS BINDING CONSTRAINTS BUDGET DEFICITS BUSINESS CYCLES CAPITAL ACCUMULATION CAPITAL FLOWS CAPITAL INFLOWS CAPITAL INTENSITY COMMERCIAL BANK COMMODITIES COMMODITY COMMODITY EXPORTS COMMODITY PRICES COMPARATIVE ADVANTAGE COMPETITIVE MARKET COMPETITIVENESS CONSUMERS CONTINGENT LIABILITIES CREDIT POLICIES CURRENCY DEBT DEBT CRISES DEBT CRISIS DEMOGRAPHIC DEMOGRAPHIC CHANGES DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPING ECONOMIES DEVELOPMENT BANKS DEVELOPMENT ECONOMICS DEVELOPMENT POLICY DEVELOPMENT STRATEGY DIMINISHING RETURNS DISPOSABLE INCOME DIVIDENDS DYNAMIC ECONOMIES ECONOMETRIC ANALYSIS ECONOMIC CONDITIONS ECONOMIC DEVELOPMENT ECONOMIC EFFICIENCY ECONOMIC GROWTH ECONOMIC HISTORY ECONOMIC OUTLOOK ECONOMIC PERFORMANCE ECONOMIC POWERHOUSE ECONOMIC REFORM ECONOMIC REFORMS ECONOMIC STRUCTURE ECONOMIES OF SCALE EMERGING ECONOMIES EMERGING MARKET EMERGING MARKET ECONOMIES EMERGING MARKETS ENERGY RESOURCES EXCHANGE RATE EXCHANGE RATE REGIMES EXCHANGE RATES EXPORT BASE EXPORT MARKETS EXPORTS EXPOSURE EXTERNALITY FACTORS OF PRODUCTION FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL INSTITUTION FINANCIAL INSTITUTIONS FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SECTORS FINANCIAL STABILITY FINANCIAL SUPPORT FINANCIAL SYSTEM FINANCIAL SYSTEMS FISCAL CONSOLIDATION FISCAL DEFICIT FLEXIBLE EXCHANGE RATE FORECASTS FOREIGN DIRECT INVESTMENT FOREIGN EXCHANGE FOREIGN FIRMS FOREIGN INVESTMENT FOREIGN TRADE FUTURE GROWTH GDP GDP DEFLATOR GDP PER CAPITA GLOBAL ECONOMIC LANDSCAPE GLOBAL ECONOMY GLOBAL EXPORTS GLOBAL MARKET GLOBAL OUTPUT GLOBAL RISK GLOBALIZATION GNP GOVERNMENT DEBT GOVERNMENT INTERVENTIONS GROSS DOMESTIC PRODUCT GROWTH OF MULTINATIONAL GROWTH POTENTIAL GROWTH RATE GROWTH RATES GROWTH THEORY HUMAN CAPITAL INCOME INCOME DISTRIBUTION INCOME GROWTH INCOME INEQUALITY INDIVIDUAL FIRMS INDUSTRIAL COUNTRIES INDUSTRIALIZATION INFLATION INFLATION TARGETING INFLATIONARY FINANCING INFORMATION TECHNOLOGY INFRASTRUCTURE INVESTMENT INFRASTRUCTURE REQUIREMENTS INTANGIBLE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL TRADE INVESTMENT CLIMATE INVESTMENT DECISION INVESTMENT POLICY JOINT VENTURES LABOR COSTS LAWS LEGISLATION LIBERALIZATION LIVING STANDARDS LOW-INCOME COUNTRIES LOW-INCOME COUNTRY MACROECONOMIC STABILIZATION MACROECONOMIC VULNERABILITIES MANUFACTURING INDUSTRIES MARGINAL COST MARKET ACCESS MARKET FAILURES MARKET PARTICIPANTS MARKET SHARE MARKET SHARES MIDDLE-INCOME COUNTRIES MIDDLE-INCOME COUNTRY MIGRATION MONETARY POLICY MONOPOLY MULTINATIONAL CORPORATIONS NATURAL RESOURCE NATURAL RESOURCES NEOCLASSICAL MODELS NET EXPORTS NEW MARKETS NONPERFORMING LOANS OUTPUT OUTPUTS PER CAPITA INCOME PER CAPITA INCOMES POLITICAL POWER POWER PARITY PRIVATE CAPITAL PRIVATE CAPITAL FLOWS PRIVATE INVESTMENT PRIVATIZATION PRODUCT MARKETS PRODUCTIVITY PRODUCTIVITY GROWTH PROTECTIONISM PUBLIC DEBT PUBLIC ENTERPRISES PURCHASING POWER RAPID GROWTH RATE OF RETURN REAL EXCHANGE RATES RESOURCE ALLOCATION RETURN ON INVESTMENT SAVINGS SAVINGS RATES SCARCE CAPITAL SEIGNIORAGE SOCIAL CAPITAL SOCIAL PROTECTION STABILIZATION POLICIES STATE ENTERPRISES STRUCTURAL CHANGE SURPLUS LABOR TARIFF BARRIERS TAX TAX COLLECTION TAX SYSTEM TELECOMMUNICATIONS TRANSACTION TRANSACTION COSTS TRANSPARENCY TRANSPORT UNEMPLOYMENT UNFAIR COMPETITION VALUE ADDED WAGES WEALTH WORLD DEVELOPMENT INDICATORS WORLD ECONOMIES WORLD ECONOMY WORLD MARKET WORLD MARKETS WORLD TRADE WORLD TRADE ORGANIZATION
Online Access:	http://documents.worldbank.org/curated/en/2012/08/16593868/learning-chinas-rise-escape-middle-income-trap-new-structural-economics-approach-latin-america http://hdl.handle.net/10986/12013

Description
Summary:	This paper discusses the causes of the middle-income trap in Latin America and the Caribbean, identifies the challenges and opportunities for Latin America that come from China's rise, and draws lessons from New Structural Economics and the Growth Identification and Facilitation Framework to help Latin America escape the middle-income trap. Countries in Latin America and the Caribbean are caught in a middle-income trap due to their inability to structurally upgrade from low value-added to high value-added products. Governments in Latin America and the Caribbean should intervene in industries in which they have a comparative advantage, calibrating supporting policies in close collaboration with the private sector through public-private sector alliances. Through continuous structural upgrading in sectors intensive in factors such as natural resources, scientific knowledge, and unskilled labor, the region could achieve dynamic growth. This would require investments in education, research and development, and physical infrastructure. Therefore, industrial upgrading and diversification would be essential to avoid further de-industrialization arising from the competitive pressures of the rise of China, broaden the base for economic growth, and create the basis for further sustained reduction in unemployment, poverty and income inequality. Failure to do so would lead to a loss of competitiveness and risks of further de-industrialization.

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