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How to avoid middle income traps ? evidence from Malaysia

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Author Info

  • Flaaen, Aaron
  • Ghani, Ejaz
  • Mishra, Saurabh

Abstract

Malaysia's structural transformation from low to middle income is a success story, making it one of the most prominent manufacturing exporters'in the world. However, like many other middle income economies, it is squeezed by the competition from low-wage economies on the one hand, and more innovative advanced economies on the other. What can Malaysia do? Does Malaysia need a new growth strategy? This paper emphasizes the need for broad structural transformation; that is, moving to higher productivity production in both goods and services. This paper examines productivity growth for Malaysia at the sectoral level, and constructs several measures of the sophistication of goods and services trade, and puts these comparisons in a global context. The results indicate that Malaysia has further opportunities for growth in the services sector in particular. Modernizing the services sector may provide a way out of the middle income trap, and serve as a source of growth for Malaysia into the future.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6427.

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Date of creation: 01 Apr 2013
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Handle: RePEc:wbk:wbrwps:6427

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Keywords: Economic Theory&Research; Banks&Banking Reform; Emerging Markets; Labor Policies; Economic Conditions and Volatility;

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References

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  1. Indermit Gill & Homi Kharas, 2007. "An East Asian Renaissance : Ideas for Economic Growth," World Bank Publications, The World Bank, number 6798, October.
  2. Markus Eberhardt & Christian Helmers & Zhihong Yu, 2011. "Is the Dragon Learning to Fly? An Analysis of the Chinese Patent Explosion," CSAE Working Paper Series 2011-15, Centre for the Study of African Economies, University of Oxford.
  3. Oded Galor & Quamrul Ashraf, 2007. "Cultural Assimilation, Cultural Diffusion and the Origin of the Wealth of Nations," Working Papers 2007-3, Brown University, Department of Economics.
  4. Ejaz Ghani & Homi Kharas, 2010. "The Service Revolution," World Bank Other Operational Studies 10187, The World Bank.
  5. Shekhar Aiyar & Romain A Duval & Damien Puy & Yiqun Wu & Longmei Zhang, 2013. "Growth Slowdowns and the Middle-Income Trap," IMF Working Papers 13/71, International Monetary Fund.
  6. Barry Eichengreen & Donghyun Park & Kwanho Shin, 2013. "Growth Slowdowns Redux: New Evidence on the Middle-Income Trap," NBER Working Papers 18673, National Bureau of Economic Research, Inc.
  7. Tuck Cheong Tang & Koi Nyen Wong, 2007. "Foreign Direct Investment and Electronics Exports: Exploratory Empirical Evidence from Malaysia's Top Five Electronics Exports," Economics Bulletin, AccessEcon, vol. 6(14), pages 1-8.
  8. Nicola Spatafora & Rahul Anand & Saurabh Mishra, 2012. "Structural Transformation and the sophistication of Production," IMF Working Papers 12/59, International Monetary Fund.
  9. Joshua AIZENMAN & Minsoo LEE & Donghyun PARK, 2012. "The Relationship between Structural Change and Inequality: A Conceptual Overview with Special Reference to Developing Asia," Working Papers DP-2012-13, Economic Research Institute for ASEAN and East Asia (ERIA).
  10. Borchert, Ingo & Mattoo, Aaditya, 2009. "The crisis-resilience of services trade," Policy Research Working Paper Series 4917, The World Bank.
  11. Alessandro Nicita & Marcelo Olarreaga, 2007. "Trade, Production, and Protection Database, 1976--2004," World Bank Economic Review, World Bank Group, vol. 21(1), pages 165-171.
  12. Mishra, Saurabh & Lundstrom, Susanna & Anand, Rahul, 2011. "Service export sophistication and economic growth," Policy Research Working Paper Series 5606, The World Bank.
  13. Desmet, Klaus & Ghani, Ejaz & O'Connell, Stephen & Rossi-Hansberg, Esteban, 2012. "The spatial development of India," Policy Research Working Paper Series 6060, The World Bank.
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. How to avoid middle-income traps? Evidence from Malaysia
    by ? in VoxEU.org on 2013-07-22 01:00:00
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Cited by:
  1. Im, Fernando Gabriel & Rosenblatt, David, 2013. "Middle-income traps : a conceptual and empirical survey," Policy Research Working Paper Series 6594, The World Bank.

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