The Middle-Income Trap Turns Ten

Since we introduced the term “middle-income trap” in 2006, it has become popular among policy makers and researchers. In May 2015, a search of Google Scholar returned more than 3,000 articles including the term and about 300 articles with the term...

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Bibliographic Details
Main Authors:	Gill, Indermit S., Kharas, Homi
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2015
Subjects:	MIC TRAPS GROWTH RATES MONETARY POLICY CAPITAL MARKETS UNEMPLOYMENT RATES ECONOMIC GROWTH CLOSED ECONOMIES URBANIZATION TRADE NEGOTIATIONS CAPITAL ACCUMULATION FOREIGN INVESTORS STRUCTURAL CHANGE MACROECONOMIC MANAGEMENT INCOME INTEREST MIDDLE- INCOME COUNTRY EXPECTATIONS EMERGING ECONOMIES FLEXIBLE EXCHANGE RATES PROPERTY RIGHTS EXCHANGE ECONOMIC DEVELOPMENTS GDP PER CAPITA LIQUIDITY DEVELOPING COUNTRIES EXPORTS ELASTICITY ENTRY POINT POLITICAL ECONOMY WORLD DEVELOPMENT INDICATORS INCENTIVES VARIABLES ENVIRONMENTAL SUSTAINABILITY PRICE BENCHMARKS SUSTAINABLE DEVELOPMENT BANKRUPTCY PROTECTIONISM FREE TRADE ECONOMIC STRUCTURES WAGE GROWTH TRENDS SAFETY NETS ECONOMIC OUTLOOK CENTRAL BANK EXTERNAL FINANCE DEVELOPMENT FOREIGN MARKETS PER CAPITA INCOMES ADVANCED COUNTRIES INTERNATIONAL FINANCE PUBLIC POLICY LABOR MARKET TOTAL FACTOR PRODUCTIVITY PER CAPITA INCOME CURRENCY DEVELOPMENT ECONOMICS LOW-INCOME COUNTRIES RENT POLITICAL POWER DEMOCRACY EXCHANGE RATES PRODUCTIVITY MIDDLE-INCOME ECONOMIES EXTERNALITIES INDUSTRIALIZATION GLOBALIZATION MARKETS WTO INCOME LEVELS VENTURE CAPITAL MIDDLE-INCOME COUNTRIES TRADE POLICY NATURAL RESOURCES CAPITAL INVESTMENTS REAL ESTATE LIBERALIZATION ECONOMIC RESEARCH CARBON EMISSIONS TAXES GROWTH THEORIES INSTITUTIONAL INFRASTRUCTURE UNEMPLOYMENT DEREGULATION EQUITY INVESTORS PRODUCTIVITY GROWTH SOCIAL SAFETY NETS HUMAN CAPITAL TECHNOLOGICAL CHANGE FEDERAL RESERVE VALUE ADDED ECONOMIC PERFORMANCE CAPITAL WAGES EFFICIENT CAPITAL INTERNATIONAL TRADE VOLATILITY BARRIERS MARKET CONDITIONS FINANCIAL CRISIS STARTUPS MARKET PRICES FUTURE VALUE COMPETITIVENESS FOREIGN DIRECT INVESTMENT PATENTS NATIONAL INCOME KNOWLEDGE ECONOMY DIVIDEND ECONOMY AGRICULTURE INCOMES MIDDLE- INCOME ECONOMIES GROWTH MODELS ECONOMIC RENTS INSTITUTIONAL CAPACITY BALANCE SHEET BENCHMARK TRADE LIBERALIZATION MIDDLE-INCOME COUNTRY MIDDLE- INCOME COUNTRIES ECONOMICS TRADE DIVERSION GOVERNANCE INFRASTRUCTURE INVESTMENTS SOCIAL CAPITAL REGIONAL INTEGRATION ECONOMIC DEVELOPMENT ADVANCED COUNTRY TRADE GDP GOODS THEORY GROWTH RATE INVESTMENT TOTAL FACTOR PRODUCTIVITY GROWTH SHARE COMPARATIVE ADVANTAGE FINANCIAL MARKETS ECONOMIC PROGRESS BANKING CURRENCY RISK DECENTRALIZATION MONEY MARKET INVESTMENTS RISK MANAGEMENT INTELLECTUAL PROPERTY CAPITAL FLOW GROWTH THEORY RAPID GROWTH EXCHANGE RATE DEMOGRAPHIC CUSTOMERS ECONOMIC GEOGRAPHY CAPITAL INVESTMENT LABOR MARKETS FINANCIAL SECTOR OPEN ECONOMIES MACROECONOMIC PERFORMANCE CAPITAL ACCOUNT GROWTH POTENTIAL MIDDLE INCOME COUNTRIES GLOBAL ECONOMIC PROSPECTS PRICES DEVELOPMENT POLICY COMPETITION
Online Access:	http://documents.worldbank.org/curated/en/2015/08/24954519/middle-income-trap-turns-ten http://hdl.handle.net/10986/22660

Description
Summary:	Since we introduced the term “middle-income trap” in 2006, it has become popular among policy makers and researchers. In May 2015, a search of Google Scholar returned more than 3,000 articles including the term and about 300 articles with the term in the title. This paper provides a (non-exhaustive) survey of this literature. The paper then discusses what, in retrospect, we missed when we coined the term. Today, based on developments in East Asia, Latin America, and Central Europe during the past decade, we would have paid more attention to demographic factors, entrepreneurship, and external institutional anchors. We would also make it clearer that to us, the term was as much the absence of a satisfactory theory that could inform development policy in middle-income economies as the articulation of a development phenomenon. Three-quarters of the people in the world now live in middle-income economies, but economists have yet to provide a reliable theory of growth to help policy makers navigate the transition from middle- to high-income status. Hybrids of the Solow-Swan and Lucas-Romer models are not unhelpful, but they are poor substitutes for a well-constructed growth framework.

The Middle-Income Trap Turns Ten

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