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The Mechanism of the Middle Income Trap and the Potential Factors Influencing China¡¯s Economic Growth

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  • Derong Zhang

    (School of Economics, Xiamen University, Xiamen 361005, China)

Abstract

Data from WDI show that developing countries are easily caught in the ¡°middle income trap.¡± To interpret the mechanism of the ¡°middle income trap,¡± this paper focuses on: (1) Based on the empirical framework of economic growth, we perform an empirical research on the determinants of economic growth at different income levels and discover that fixed capital investment, FDI and human capital accumulation are the main factors influencing less developed economies while for the upper middle income level and high-income level countries, the engines of economic growth change to institutions and R&D. (2) We discuss the possible reasons why developing countries can have rapid economic growth before reaching the middle income level, but cannot transform growth mechanisms in the middle income level. (3) We classify the factors that have influenced China¡¯s economic growth since the reform and analyze the potential ones for China¡¯s future development.

Suggested Citation

  • Derong Zhang, 2014. "The Mechanism of the Middle Income Trap and the Potential Factors Influencing China¡¯s Economic Growth," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 9(3), pages 499-528, September.
    • Handle: RePEc:fec:journl:v:9:y:2014:i:3:p:499-528
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    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-003-014-0024-2
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    Cited by:

    1. Glawe, Linda & Wagner, Helmut, 2020. "China in the middle-income trap?," China Economic Review, Elsevier, vol. 60(C).

    More about this item

    Keywords

    middle income trap; economic growth; growth mechanisms;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy

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