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Avoiding Middle-Income Growth Traps

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  • Pierre-Richard Agénor
  • Otaviano Canuto

    ()
    (World Bank)

  • Michael Jelenic

    ()
    (World Bank)

Abstract

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 (Agénor and Canuto 2012), as well as a growing body of research on growth slowdowns, this note provides an analytical characterization of “middleincome traps” as stable, low-growth economic equilibria 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.

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Bibliographic Info

Article provided by The World Bank in its journal Economic Premise.

Volume (Year): (2012)
Issue (Month): 98 (November)
Pages: 1-7

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Handle: RePEc:wbk:prmecp:ep98

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  1. Weinberg, Bruce A., 2011. "Developing science: Scientific performance and brain drains in the developing world," Journal of Development Economics, Elsevier, vol. 95(1), pages 95-104, May.
  2. Canuto, Otaviano & Dutz, Mark & Reis, José Guilherme, 2010. "Technological Learning and Innovation: Climbing a Tall Ladder," World Bank - Economic Premise, The World Bank, issue 21, pages 1-8, July.
  3. Commission on Growth and Development, 2008. "The Growth Report : Strategies for Sustained Growth and Inclusive Development," World Bank Publications, The World Bank, number 6507, October.
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