Avoiding Middle-Income Growth Traps

Since the 1950s, rapid growth has allowed a significant number of countries to reach middle-income status; yet, very few have made the additional leap needed to become high-income economies. Rather, many developing countries have become caught in w...

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Bibliographic Details
Main Authors:	Agénor, Pierre-Richard, Canuto, Otaviano, Jelenic, Michael
Format:	Brief
Language:	English en_US
Published:	2014
Subjects:	ACCOUNTING ADVANCED ECONOMIES ADVERSE CONSEQUENCES AGRICULTURE AVERAGE GROWTH AVERAGE GROWTH RATE BEST PRACTICES BRAIN DRAINS BROADBAND BROADBAND NETWORKS BUSINESS CYCLE CAPITAL ACCUMULATION CHAMBER OF COMMERCE COMMUNICATION TECHNOLOGIES COMMUNICATIONS INFRASTRUCTURE COMMUNICATIONS NETWORKS COMMUNICATIONS SERVICES COMPETITIVENESS CONSTANT PRICES CRISES DEBT DEBT CRISES DEVELOPED ECONOMIES DEVELOPING COUNTRIES DEVELOPING ECONOMIES DEVELOPING WORLD DEVELOPMENT ECONOMICS DEVELOPMENT OF BROADBAND DIGITAL CONTENT DISSEMINATION OF INFORMATION DOMESTIC MARKETS ECONOMIC GROWTH ECONOMIC POLICIES ECONOMIC POLICY ECONOMIC RESEARCH ECONOMIC THEORY ELECTRICITY EMERGING MARKETS EQUIPMENT EXPORTS EXTERNALITIES FINANCE CORPORATION FLEXIBLE LABOR MARKETS FOREIGN INVESTMENT FRAMEWORK FOR INNOVATION GDP GDP PER CAPITA GLOBAL LEADERS GOVERNMENT FUNDING GROSS DOMESTIC PRODUCT GROWTH PROCESS GROWTH RATE HIGH GROWTH HIGH UNEMPLOYMENT HIGH-SPEED COMMUNICATIONS HUMAN CAPITAL INCOME INCOME GROUP INCOME LEVELS INDUSTRIAL DEVELOPMENT INNOVATION INTELLECTUAL PROPERTY INTELLECTUAL PROPERTY RIGHTS INTERACTIVE MEDIA INTERNATIONAL COMPETITIVENESS INTERNATIONAL FINANCE INTERNATIONAL TRADE LABOR COSTS LABOR FORCE LABOR MARKET LABOR MARKET FLEXIBILITY LABOR MARKET RIGIDITIES LABOR MARKETS LABOR MOVEMENTS LABOR SUPPLY LIBERALIZATION MACROECONOMICS MANUFACTURING MARGINAL BENEFITS MARGINAL PRODUCTIVITY MARKET DISTORTION MARKET DISTORTIONS MARKET FAILURES MARKET SHARE MIDDLE-INCOME COUNTRIES MIDDLE-INCOME ECONOMIES MULTIMEDIA MULTIPLE EQUILIBRIA NEOCLASSICAL GROWTH NEOCLASSICAL GROWTH MODEL NETWORK EXTERNALITIES OCCUPATIONS OUTPUT PACE OF INNOVATION PATENTS PER CAPITA INCOME PER CAPITA INCOMES POLICY ISSUES POLICY RESEARCH POLITICAL UPHEAVALS POSITIVE IMPACT POVERTY REDUCTION PRODUCTIVITY PRODUCTIVITY GROWTH PRODUCTIVITY INCREASES PROPERTY RIGHTS PUBLIC FUNDS PUBLIC INFRASTRUCTURE PUBLIC POLICIES PUBLIC POLICY PUBLIC SECTOR R&D RAPID DEVELOPMENT RAPID GROWTH REAL WAGES REGULATORY FRAMEWORK RELATIVE WAGES RESULT SUPPLY CHAINS TECHNICAL SKILLS TELECOMMUNICATIONS TELECOMMUNICATIONS NETWORKS TOTAL FACTOR PRODUCTIVITY TOTAL FACTOR PRODUCTIVITY GROWTH TRADE BARRIERS TRANSACTION TRANSACTION COSTS UNSKILLED LABOR USER VALUE CHAIN VALUE CHAINS WAGES WORLD ECONOMY WORLD MARKETS WWW
Online Access:	http://documents.worldbank.org/curated/en/2012/11/16983271/avoiding-middle-income-growth-traps http://hdl.handle.net/10986/16954

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Summary:	Since the 1950s, rapid growth has allowed a significant number of countries to reach middle-income status; yet, very few have made the additional leap needed to become high-income economies. Rather, many developing countries have become caught in what has been called a middle-income trap, characterized by a sharp deceleration in growth and in the pace of productivity increases. Drawing on the findings of a recently released working paper (Agenor and Canuto 2012), as well as a growing body of research on growth slowdowns, this note provides an analytical characterization of 'middle-income traps' as stable, low-growth economic equilibrium where talent is misallocated and innovation stagnates. To counteract middle-income traps, there are a number of public policies that governments can pursue, such as improving access to advanced infrastructure, enhancing the protection of property rights, and reforming labor markets to reduce rigidities all implemented within a context where technological learning and research and development (R&D) are central to enhancing innovation. Such policies not only explain why some economies particularly in East Asia were able to avoid the middle-income trap, but are also instructive for other developing countries seeking to move up the income ladder and reach high-income status.

Avoiding Middle-Income Growth Traps

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