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Re-examining the Middle-Income Trap Hypothesis (MITH): What to Reject and What to Revive?

Listed author(s):
  • Xuehui Han
  • Shang-Jin Wei

Do middle-income countries face difficult challenges producing consistent growth? Using transition matrix analysis, we can easily reject any unconditional notion of a “middle-income trap” in the data. However, countries have different fundamentals and policies. Using a nonparametric classification technique, we search for variables that separate fast- and slow-growing countries. For middle-income countries, a relatively large working age population, sex ratio imbalance, macroeconomic stability, and financial development appear to be the key discriminatory variables. We do the same exercise for low-income countries. This framework yields conditions under which countries in the low- and middle-income ranges move forward or backward, or are trapped.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 23126.

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Date of creation: Feb 2017
Publication status: published as Han, Xuehui & Wei, Shang-Jin, 2017. "Re-examining the middle-income trap hypothesis (MITH): What to reject and what to revive?," Journal of International Money and Finance, Elsevier, vol. 73(PA), pages 41-61.
Handle: RePEc:nbr:nberwo:23126
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