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Middle-income growth traps

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  • Agénor, Pierre-Richard
  • Canuto, Otaviano

Abstract

This 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 to escape from that trap. The implications of other public policies, including the protection of property rights and labor market reforms, are also discussed.

Suggested Citation

  • Agénor, Pierre-Richard & Canuto, Otaviano, 2015. "Middle-income growth traps," Research in Economics, Elsevier, vol. 69(4), pages 641-660.
  • Handle: RePEc:eee:reecon:v:69:y:2015:i:4:p:641-660 DOI: 10.1016/j.rie.2015.04.003
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    Cited by:

    1. Rahmanov, Ramiz & Qasimov, Asif & Tahirova, Gulzar, 2016. "The Labor Market in Azerbaijan," EconStor Preprints 142694, ZBW - German National Library of Economics.
    2. Kenneth Timmis & Victor Lorenzo & Willy Verstraete & Juan Luis Ramos & Antoine Danchin & Harald Brüssow & Brajesh Singh & James Timmis, 2017. "The contribution of microbial biotechnology to economic growth and employment creation," Post-Print hal-01617978, HAL.
    3. Agénor, Pierre-Richard & Dinh, Hinh T., 2015. "Social capital, product imitation and growth with learning externalities," Journal of Development Economics, Elsevier, pages 41-54.
    4. repec:kap:iecepo:v:14:y:2017:i:4:d:10.1007_s10368-016-0360-4 is not listed on IDEAS
    5. Glawe, Linda & Wagner, Helmut, 2016. "China in the Middle-Income Trap?," MPRA Paper 73336, University Library of Munich, Germany.
    6. Agénor, Pierre-Richard & Neanidis, Kyriakos C., 2015. "Innovation, public capital, and growth," Journal of Macroeconomics, Elsevier, vol. 44(C), pages 252-275.
    7. Agénor, Pierre-Richard & Canuto, Otaviano, 2017. "Access to finance, product innovation and middle-income traps," Research in Economics, Elsevier, pages 337-355.
    8. Pierre-Richard Agénor & Karim El Aynaoui, 2014. "Politiques Publiques, Transformation Industrielle, Croissance et Emploi au Maroc : Une Analyse Quantitative [Public Policy, Industrial Transformation, Growth and Employment in Morocco: A Quantitative ," Research papers & Policy papers 1403, OCP Policy Center.
    9. Dabús, Carlos & Tohmé, Fernando & Caraballo, M. Ángeles, 2016. "A middle income trap in a small open economy: Modeling the Argentinean case," Economic Modelling, Elsevier, vol. 53(C), pages 436-444.
    10. Linda Glawe & Helmut Wagner, 2016. "The Middle-Income Trap: Definitions, Theories and Countries Concerned—A Literature Survey," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 58(4), pages 507-538, December.

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