Middle-income growth traps
AbstractThis paper studies the existence of middle-income growth traps in a two-period overlapping generations model of economic growth with two types of labor and endogenous occupational choices. It also distinguishes between"basic"and"advanced"infrastructure, with the latter promoting design activities, and accounts for a knowledge network externality associated with product diversification. Multiple steady-state equilibria may emerge, one of them taking the form of a low-growth trap characterized by low productivity growth and a misallocation of talent -- defined as a relatively low share of high-ability workers in design activities. Improved access to advanced infrastructure may help escape from that trap. The implications of other public policies, including the protection of property rights and labor market reforms, are also discussed.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 6210.
Date of creation: 01 Sep 2012
Date of revision:
Economic Theory&Research; Political Economy; Labor Policies; Economic Growth; Debt Markets;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-10-06 (All new papers)
- NEP-DGE-2012-10-06 (Dynamic General Equilibrium)
- NEP-FDG-2012-10-06 (Financial Development & Growth)
- NEP-PBE-2012-10-06 (Public Economics)
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