And so, such countries commonly suffer from low investment, slow growth, limited industrial diversification and poor labor market conditions. Few countries are more concerned about this malady than Thailand, which has transformed itself over the past few decades from a low-income economy dominated by traditional agriculture into a significant player in electronics, automobiles and various agribusiness products. Most famous as a tourist-friendly, sun-drenched destination, Thailand ranks second in the world in the export of hard disk drives; sixth in the export of rubber tires; seventh in the export of computer devices; and 12th in automotive exports.
The transition to high-income levels then seemingly becomes unattainable. According to World Bank estimates, only 13 of middle-income economies in had become high-income economies by This is an increasingly relevant phenomenon.
The share of world population living in middle-income countries has risen dramatically over the last decades resulting from the rapid growth in Asian economies — particularly China and India. Growth slowdowns can often be attributed to the disappearance of factors that generate high growth during an initial phase of rapid development.
Growth slowdowns coincide with the point where the pool of transferrable unskilled labor is exhausted so that productivity growth due to shifting additional workers to industry from agriculture and from technology catch-up is diminishing.
International competitiveness is eroded and output and growth slow. The first stage of growth from low to middle income is input driven based on abundant labor supply and high rates of investment. Sustained growth toward the high-income level must be increasingly characterized by a relative abundance of human capital and availability of technological and managerial resources.
Middle-income countries are squeezed between the low-wage poor-country competitors that dominate in mature industries and the rich-country innovators that dominate in industries undergoing rapid technological change.
What are the conditions that allow a dynamic transformation of comparative advantage to avoid the middle-income trap? How to move from resource-driven growth to growth based on high productivity and innovation?
Can building a high-quality education system be sufficient without more responsive and modern institutions to support competition and innovation? What can we learn from the experience of Asian economies that successfully managed the transition, such as Korea, Taiwan, Hong Kong or Singapore?
What is the role of social capital both amongst the population of a country and between population and government in the transition process from middle to high income? Research suggests that ethnic heterogeneity and income inequality can cause a lack of social capital. Is strengthening democracy in the political system necessary to avoid the middle-income trap?Jul 13, · The “Middle Income Trap” is about a mixture of Neoliberalism and public policy, sitting on top of the capitalist paradox Karl Marx made famous in Das Kapital that they has to be a scheme to keep me working and consuming after me needs are satisfied or the capitalist system collapses.
The Middle-Income Trap Countries that have been subject to the middle-income trap have had very different experiences, as shown in the figure below. Some countries—such as the Asian Tigers (Hong Kong, Singapore, South Korea and Taiwan), Spain and Ireland—have experienced rapid and persistent relative income growth.
Escaping the Middle-Income Trap The other provocative result is that slowdowns are more likely in countries with undervalued real exchange rates This finding will attract the attention of China watchers, and Asia watchers generally.
2. Which of the following is NOT a characteristic of countries which have broken through the middle income trap?
*. The middle-income trap is the situation in which a country’s growth slows after reaching middle income levels. The transition to high-income levels then seemingly becomes unattainable. According to World Bank estimates, only 13 of middle-income economies in had .
A paper published by the Levy Economics Institute indicates that as of , 35 of 52 middle-income countries were considered to be stuck in the middle-income trap, with most located in Latin.