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Caught in the Middle? The Economics of Middle-Income Traps


  • Pierre-Richard AGENOR

    (Université de Manchester)


This paper provides an overview of the recent analytical and empirical literature on middle-income traps. The first part examines the descriptive and statistical evidence on these traps. The second discusses the various arguments that have been put forward to explain the existence, and persistence, of middle-income traps. These arguments include diminishing returns to physical capital, exhaustion of cheap labor and imitation gains, insufficient quality of human capital, inadequate contract enforcement and intellectual property protection, distorted incentives and misallocation of talent, lack of access to advanced infrastructure, and lack of access to finance, especially in the form of venture capital. The third part considers public policies aimed at avoiding, and escaping from, middle-income traps. The concluding part identifies a number of directions in which the empirical and theoretical literature could fruitfully evolve.

Suggested Citation

  • Pierre-Richard AGENOR, 2016. "Caught in the Middle? The Economics of Middle-Income Traps," Working Papers P142, FERDI.
  • Handle: RePEc:fdi:wpaper:2520

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    Cited by:

    1. Cyn-Young Park & Rogelio Mercado Jr., 2017. "Economic Convergence, Capital Accumulation, and Income Traps: Empirical Evidence," Trinity Economics Papers tep1117, Trinity College Dublin, Department of Economics.

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    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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