Difference between revisions of "Middle-income trap"
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[[Middle-income countries]] is the term which the [[World Bank]] defines as: "economies with a gross national income (GNI) per capita between $1,136 and $13,845 as of 2024. MICs consist of lower-middle-income countries and upper-middle-income countries, both of which are part of the income categories that the World Bank uses to classify economies for operational and analytical purposes,"<ref>[https://www.investopedia.com/terms/m/middle-income-countries.asp Middle-Income Countries (MICs): Characteristics and Significance], Investopedia</ref> as measured in [[US]] [[Petrodollar]]s. | [[Middle-income countries]] is the term which the [[World Bank]] defines as: "economies with a gross national income (GNI) per capita between $1,136 and $13,845 as of 2024. MICs consist of lower-middle-income countries and upper-middle-income countries, both of which are part of the income categories that the World Bank uses to classify economies for operational and analytical purposes,"<ref>[https://www.investopedia.com/terms/m/middle-income-countries.asp Middle-Income Countries (MICs): Characteristics and Significance], Investopedia</ref> as measured in [[US]] [[Petrodollar]]s. | ||
| − | The '''middle-income trap''' refers to an economic theory where middle-income countries are failing to transform themselves | + | The '''middle-income trap''' refers to an economic theory where middle-income countries are failing to transform themselves into high-income economies due to its rising costs and declining competitiveness (Historically few countries successfully manage the transition from low to middle to high income).<ref>[https://elibrary.worldbank.org/doi/10.1596/9780821387856_CH04#:~:text=The%20middle%2Dincome%20trap%20refers,to%20middle%20to%20high%20income. Middle-Income Trap]</ref><ref>[https://asiasociety.org/new-york/china-may-be-running-out-time-escape-middle-income-trap China May Be Running Out of Time To Escape the Middle-Income Trap], Asia Society, 2017</ref><ref>[https://www.adb.org/publications/tracking-middle-income-trap-what-it-who-it-and-why-part-1 Tracking the Middle-Income Trap: What is It, Who is in It, and Why? (Part 1)], Asia Development Bank, 2012</ref><ref>[https://www.adb.org/publications/tracking-middle-income-trap-what-it-who-it-and-why-part-2 Tracking the Middle-Income Trap: What is It, Who is in It, and Why? (Part 2)], Asia Development Bank, 2012</ref> |
The Asia Society describes the middle-income trap thusly: "The “middle-income trap” is a theory of economic development in which wages in a country rise to the point that growth potential in export-driven low-skill manufacturing is exhausted before it attains the [[Innovation|innovative]] capability needed to boost [[productivity]] and compete with developed countries in higher value-chain industries. Thus, there are few avenues for further growth — and wages stagnate."<ref>[https://asiasociety.org/new-york/china-may-be-running-out-time-escape-middle-income-trap China May Be Running Out of Time To Escape the Middle-Income Trap], Asia Society, 2017</ref> | The Asia Society describes the middle-income trap thusly: "The “middle-income trap” is a theory of economic development in which wages in a country rise to the point that growth potential in export-driven low-skill manufacturing is exhausted before it attains the [[Innovation|innovative]] capability needed to boost [[productivity]] and compete with developed countries in higher value-chain industries. Thus, there are few avenues for further growth — and wages stagnate."<ref>[https://asiasociety.org/new-york/china-may-be-running-out-time-escape-middle-income-trap China May Be Running Out of Time To Escape the Middle-Income Trap], Asia Society, 2017</ref> | ||
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The 2023 Mint News article ''There is no easy escape from the middle-income trap'' indicates: "Graduating from middle income to developed world status is the greatest prize in development economics. Only a handful of [[East Asia]]n and [[Central Europe]]an countries have made the transition so far, along with a few fortunate resource-rich countries."<ref>[https://archive.ph/MrPyA#selection-1799.0-1799.51 ''There is no easy escape from the middle-income trap''], Mint News, 2023</ref> | The 2023 Mint News article ''There is no easy escape from the middle-income trap'' indicates: "Graduating from middle income to developed world status is the greatest prize in development economics. Only a handful of [[East Asia]]n and [[Central Europe]]an countries have made the transition so far, along with a few fortunate resource-rich countries."<ref>[https://archive.ph/MrPyA#selection-1799.0-1799.51 ''There is no easy escape from the middle-income trap''], Mint News, 2023</ref> | ||
| − | Slowing growth in emerging markets during the [[Financial Crisis of 2008|post 2007/2008 financial crisis]] period provided a new impetus to the “middle-income trap” debate.<ref>[https://www.brookings.edu/articles/is-economic-growth-in-middle-income-countries-different-from-low-income-countries/ Is economic growth in middle-income countries different from low-income countries?] by Barry Eichengreen, Donghyun Park, and Kwanho Shin, [[Brookings Institute]], September 25, 2017</ref> | + | Slowing growth in emerging markets during the [[Financial Crisis of 2008|post-2007/2008 financial crisis]] period provided a new impetus to the “middle-income trap” debate.<ref>[https://www.brookings.edu/articles/is-economic-growth-in-middle-income-countries-different-from-low-income-countries/ Is economic growth in middle-income countries different from low-income countries?] by Barry Eichengreen, Donghyun Park, and Kwanho Shin, [[Brookings Institute]], September 25, 2017</ref> |
A 2017 [[Brookings Institute]] article notes: "A number of structural factors, such as the shift from input-led growth to productivity- and innovation-led growth, make the middle-to-high transition more challenging. The idea of a middle-income trap resonates especially in [[Latin America]], where many countries have been trapped at middle income for a long time."<ref>[https://www.brookings.edu/articles/is-economic-growth-in-middle-income-countries-different-from-low-income-countries/ Is economic growth in middle-income countries different from low-income countries?] by Barry Eichengreen, Donghyun Park, and Kwanho Shin, [[Brookings Institute]], September 25, 2017</ref> | A 2017 [[Brookings Institute]] article notes: "A number of structural factors, such as the shift from input-led growth to productivity- and innovation-led growth, make the middle-to-high transition more challenging. The idea of a middle-income trap resonates especially in [[Latin America]], where many countries have been trapped at middle income for a long time."<ref>[https://www.brookings.edu/articles/is-economic-growth-in-middle-income-countries-different-from-low-income-countries/ Is economic growth in middle-income countries different from low-income countries?] by Barry Eichengreen, Donghyun Park, and Kwanho Shin, [[Brookings Institute]], September 25, 2017</ref> | ||
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The abstract for the Asian Development Bank 2015 paper entitled ''The Middle-Income Transition around the Globe: Characteristics of Graduation and Slowdown'' indicates: | The abstract for the Asian Development Bank 2015 paper entitled ''The Middle-Income Transition around the Globe: Characteristics of Graduation and Slowdown'' indicates: | ||
| − | {{Cquote|The paper investigates the situation of middle-income economies around the world. Since 1965, only 18 economies with a population of more than 3 million and not dependent on oil exports have made the transition to being high income. Many more have not been able to move beyond the middle-income stage. We conduct statistical tests of differences between two groups of economies across a range of growth and development variables. The results suggest that middle-income economies are particularly weak in the following areas: governance, infrastructure, savings and investment, inequality, and quality—but not quantity—of education. The findings are used to suggest whether the People’s Republic of China is successfully progressing through the middle-income stage or whether it may get caught in a middle-income trap.<ref>[https://www.adb.org/sites/default/files/publication/159840/adbi-wp519.pdf ''The Middle-Income Transition around the Globe: Characteristics of Graduation and Slowdown''] by Paul Vandenberg, Lilibeth Poot, and Jeffrey Miyamoto. Asian Development Bank. ADBI Working Paper Series. No. 519. March 2015</ref>}} | + | {{Cquote|The paper investigates the situation of middle-income economies around the world. Since 1965, only 18 economies with a population of more than 3 million and not dependent on oil exports have made the transition to being high-income. Many more have not been able to move beyond the middle-income stage. We conduct statistical tests of differences between two groups of economies across a range of growth and development variables. The results suggest that middle-income economies are particularly weak in the following areas: governance, infrastructure, savings and investment, inequality, and quality—but not quantity—of education. The findings are used to suggest whether the People’s Republic of China is successfully progressing through the middle-income stage or whether it may get caught in a middle-income trap.<ref>[https://www.adb.org/sites/default/files/publication/159840/adbi-wp519.pdf ''The Middle-Income Transition around the Globe: Characteristics of Graduation and Slowdown''] by Paul Vandenberg, Lilibeth Poot, and Jeffrey Miyamoto. Asian Development Bank. ADBI Working Paper Series. No. 519. March 2015</ref>}} |
== Criticisms of the middle-income trap theory == | == Criticisms of the middle-income trap theory == | ||
Latest revision as of 18:14, May 11, 2024
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Many Latin American middle-income countries haven't become high-income countries and have half the labor productivity of countries that are technological leaders.[1][2]
Middle-income countries is the term which the World Bank defines as: "economies with a gross national income (GNI) per capita between $1,136 and $13,845 as of 2024. MICs consist of lower-middle-income countries and upper-middle-income countries, both of which are part of the income categories that the World Bank uses to classify economies for operational and analytical purposes,"[3] as measured in US Petrodollars.
The middle-income trap refers to an economic theory where middle-income countries are failing to transform themselves into high-income economies due to its rising costs and declining competitiveness (Historically few countries successfully manage the transition from low to middle to high income).[4][5][6][7]
The Asia Society describes the middle-income trap thusly: "The “middle-income trap” is a theory of economic development in which wages in a country rise to the point that growth potential in export-driven low-skill manufacturing is exhausted before it attains the innovative capability needed to boost productivity and compete with developed countries in higher value-chain industries. Thus, there are few avenues for further growth — and wages stagnate."[8]
The 2023 Mint News article There is no easy escape from the middle-income trap indicates: "Graduating from middle income to developed world status is the greatest prize in development economics. Only a handful of East Asian and Central European countries have made the transition so far, along with a few fortunate resource-rich countries."[9]
Slowing growth in emerging markets during the post-2007/2008 financial crisis period provided a new impetus to the “middle-income trap” debate.[10]
A 2017 Brookings Institute article notes: "A number of structural factors, such as the shift from input-led growth to productivity- and innovation-led growth, make the middle-to-high transition more challenging. The idea of a middle-income trap resonates especially in Latin America, where many countries have been trapped at middle income for a long time."[11]
Contents
- 1 Asian Development Bank: The middle-income countries transition to high-income counties around the globe: Characteristics of graduation and slowdown
- 2 Criticisms of the middle-income trap theory
- 3 Material related to whether or not China escapes the middle-income trap
- 4 India and the middle-income trap
- 5 Philippines is projected to move from a lower middle-income country to an upper middle-income country. Philippines and the middle-income trap
- 6 Former high-income countries that are now middle-income countries
- 7 Journal articles and other scholarship
- 8 External links
- 9 References
Asian Development Bank: The middle-income countries transition to high-income counties around the globe: Characteristics of graduation and slowdown
The Asian Development Bank is a regional development bank established in 1966 with 31 offices in the world designed to promote social and economic development in Asia. The Bank is headquartered in Manilla, Philippines.
The abstract for the Asian Development Bank 2015 paper entitled The Middle-Income Transition around the Globe: Characteristics of Graduation and Slowdown indicates:
| “ | The paper investigates the situation of middle-income economies around the world. Since 1965, only 18 economies with a population of more than 3 million and not dependent on oil exports have made the transition to being high-income. Many more have not been able to move beyond the middle-income stage. We conduct statistical tests of differences between two groups of economies across a range of growth and development variables. The results suggest that middle-income economies are particularly weak in the following areas: governance, infrastructure, savings and investment, inequality, and quality—but not quantity—of education. The findings are used to suggest whether the People’s Republic of China is successfully progressing through the middle-income stage or whether it may get caught in a middle-income trap.[12] | ” |
Criticisms of the middle-income trap theory
- The new era of unconditional convergence, Journal of Development Economics, Volume 152, September 2021, 102687
- Transitioning From Low-income Growth To High-income Growth: Is There a Middle Income Trap, Asia Development Bank, Asia Development Bank, 2017
Flag of China
See also: China
China may escape the middle-income trap
- Aiming for the Top: Can China Escape the Middle Income Trap?, 2019
- How China Plans To Avoid The Middle Income Trap, 2023 video
- Can China Escape the Middle Income Trap?, Dr. Nicholas R. Lardy, Anthony M. Solomon Senior Fellow at the Peterson Institute for International Economics, video
Arguments that China will not escape the middle-income trap
- China Confronts the Middle-Income Trap by Nouriel Roubini (economist), Project Syndicate, 2024
- China has yet to join the ‘rich country’ club. Has the middle-income trap been sprung?, South China Morning Post, 2024
- With “Xinomics” Caught in a Trap, China Will Not Join the Ranks of Advanced Economies, September 2023, Nippon.com
India and the middle-income trap
Philippines is projected to move from a lower middle-income country to an upper middle-income country. Philippines and the middle-income trap
See also: Middle-income countries
Flag of the Philippines
According to BusinessWorld Online: "The World Bank currently classifies the Philippines as a lower middle-income country with a GNI per capita of $3,950. The Philippines has been classified as a lower middle-income country since 1987, which is the earliest available data from the World Bank."[13]
At the present time, the Philippines has high GNP growth and it is projected to become an upper middle-income country by 2025/2026.[14][15]
Articles on the Philippines and the middle-income trap:
- Philippines: 47 years in lower middle-income country limbo, BusinessWorld, 2023
- The Philippines and the middle-income trap, PhilStar Global, 2022
Former high-income countries that are now middle-income countries
Former high-income countries and the year(s) during which they held such classification is/are shown in parentheses.[16]
- Argentina (2014, 2017)
- Equatorial Guinea (2007–14)
- Mauritius (2019)
- Mayotte (1990)
- Netherlands Antilles (1994–2009)
- Palau (2016–20)
- Russia (2012–14, 2022)
- Venezuela (2014)
Journal articles and other scholarship
- Kim, B. (2023). How to Escape the Middle-Income Trap: Lessons for the ODA Policy. Journal of Policy Studies, 38(1), 45–58. https://doi.org/10.52372/jps38104
- Escaping the middle-income trap: A study on a developing economy, Cogent Social Sciences, Volume 9, 2023 - Issue 2
- Can Partial Growth Coalitions Build Pathways Out of the Middle-Income Trap? The Case of Querétaro, México, Studies in Comparative International Development. 10 February 2023. DOI:10.1007/s12116-023-09385-0Corpus ID: 256772652
- Is Southeast Asia falling into a Latin American style “middle-income trap”?, Cambridge Working Papers in Economics, CWPE 2267. Published 9 November 2022. Website www.econ.cam.ac.uk/cwpe
- The new era of unconditional convergence, Journal of Development Economics, Volume 152, September 2021, 102687
- The Middle-Income Trap. More Politics than Economics, Cambridge University Press: 30 August 2016
- CAUGHT IN THE MIDDLE? THE ECONOMICS OF MIDDLE-INCOME TRAPS, Journal of Economic Surveys, 22 August 2016. https://doi.org/10.1111/joes.12175
- Tracking the Middle-Income Trap: What is it, Who is in it, and Why?, Levy Economics Institute, Working Paper No. 715, May 2, 2012
External links
- How to avoid the 'middle-income trap', ODI Global Advisory
- Which countries have escaped the middle-income trap?, The Economist, March 30, 2023
- There is no easy escape from the middle-income trap, Mint News, 2023
- Is economic growth in middle-income countries different from low-income countries? by Barry Eichengreen, Donghyun Park, and Kwanho Shin, Brookings Institute, September 25, 2017
- Re-examing the Middle Income Trap Hypothesis (MITH): What to Reject and What to Revive, National Bureau of Economic Research Working Paper by Xuehui Han and Shang-Jin Wei, Working Paper 23126, 2017[17]
Videos:
- Middle Income Trap- Explained in 2 Minutes
- What is Middle Income Trap: Who Are The Middle Income Countries
References
- ↑ Is economic growth in middle-income countries different from low-income countries? by Barry Eichengreen, Donghyun Park, and Kwanho Shin, Brookings Institute, September 25, 2017
- ↑ Is Southeast Asia falling into a Latin American style “middle-income trap”?, Cambridge Working Papers in Economics, CWPE 2267. Published 9 November 2022. Website www.econ.cam.ac.uk/cwpe
- ↑ Middle-Income Countries (MICs): Characteristics and Significance, Investopedia
- ↑ Middle-Income Trap
- ↑ China May Be Running Out of Time To Escape the Middle-Income Trap, Asia Society, 2017
- ↑ Tracking the Middle-Income Trap: What is It, Who is in It, and Why? (Part 1), Asia Development Bank, 2012
- ↑ Tracking the Middle-Income Trap: What is It, Who is in It, and Why? (Part 2), Asia Development Bank, 2012
- ↑ China May Be Running Out of Time To Escape the Middle-Income Trap, Asia Society, 2017
- ↑ There is no easy escape from the middle-income trap, Mint News, 2023
- ↑ Is economic growth in middle-income countries different from low-income countries? by Barry Eichengreen, Donghyun Park, and Kwanho Shin, Brookings Institute, September 25, 2017
- ↑ Is economic growth in middle-income countries different from low-income countries? by Barry Eichengreen, Donghyun Park, and Kwanho Shin, Brookings Institute, September 25, 2017
- ↑ The Middle-Income Transition around the Globe: Characteristics of Graduation and Slowdown by Paul Vandenberg, Lilibeth Poot, and Jeffrey Miyamoto. Asian Development Bank. ADBI Working Paper Series. No. 519. March 2015
- ↑ Philippines could reach upper middle-income status by 2025 or 2026, BusinessWorld Online, 2023
- ↑ Philippines likely to be upper middle-income country by 2026, Money Control website, November 2023
- ↑ Philippines could reach upper middle-income status by 2025 or 2026, BusinessWorld Online, 2023
- ↑ "comparison with the previous fiscal year". World Bank. Retrieved 2018-04-22.
- ↑ Re-examining the Middle-Income Trap Hypothesis (MITH): What to Reject and What to Revive?, Xuehui Han and Shang-Jin Wei, WORKING PAPER 23126 DOI 10.3386/w23126, ISSUE DATE February 2017
