“What difference does it make (to be in the Middle Income Trap)?”: An empirical exploration of the drivers of growth slowdowns

Persistent growth slowdown, generally called Middle-Income Trap (MIT), is a growing concern for middle income countries' governments and for regional and international development banks. This paper (i) uses a mixed approach to identify episodes of MIT in a five-year period panel of 132 countries covering the 1950–2010 period and (ii) tests empirically various explaining factors linked to productive change that have been put forward by the recent literature. Our identification approach consists in comparing the impact of a variety of productive factors on medium-run GDP growth inside and outside the MIT. We find that the demographic drag, skill misallocation and the patterns of export diversification help explain why some middle income countries underwent or are still undergoing persistent growth slowdowns. Our results are robust to various specification and sampling changes.