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The Product Space and the Middle-Income Trap: Comparing Asian and Latin American Experiences

Author

Listed:
  • Anna Jankowska

    (OECD)

  • Arne Nagengast

    (OECD)

  • José Ramón Perea

    (OECD)

Abstract

Rapid and sustained economic growth in the emerging world has brought new members, notably China, into the group of middle-income countries. Reaching this level of income, however, has historically presented countries with a new set of challenges to development, resulting in slowing growth and an entrapment in what is known as the middle-income trap. Limited income convergence in Latin America has at least partly been due to its reduced capacity to engage in a structural transformation conducive to higher productivity. In contrast, emerging Asia offers a few examples of these ‚virtuous. productive transformations. With these two references in mind, we build a comparative analysis based on the following points: First, we illustrate differences in the process of structural transformation, both with regard to sector productivity and employment absorption. Second, we adopt the Product Space methodology to compare the structural transformation that took place in both regions. Finally, we consider the role played by Productive Development Policies (PDP) in shaping the process of structural transformation, through a comparative review of these policies in Korea, Brazil and Mexico. In short, the analysis allows us to gauge the role that the economic specialisation of a country plays in facilitating transitions to more advanced stages of economic development. La croissance rapide et soutenue dans les économies émergentes a fait rentrer des nouveaux membres, dont la Chine, dans le groupe des pays à revenu intermédiaire. Cependant, atteindre ce niveau de revenu, a historiquement supposé pour ces pays de faire face à de nouveaux défis pour le développement, entraînant un ralentissement de la croissance et une situation de stagnation connue sous le nom de piège des revenus intermédiaires. La convergence toutefois limitée de l’Amérique latine est en partie expliquée par sa capacité réduite à s’engager dans des transformations structurelles vers une productivité plus élevée. En revanche, l’Asie émergente nous présente des exemples de ces vertueuses transformations productives. Tenant compte de ces deux différences, nous élaborons une analyse comparative basée sur les dimensions suivantes : D’abord, nous illustrons des différences dans le processus de transformation structurelle, à la fois par rapport à la productivité sectorielle et la relocalisation d’emplois. Par la suite, nous adoptons la méthodologie de Product Space pour comparer la transformation structurelle qui a eu lieu dans les deux régions. Finalement, nous considérons le rôle des politiques de développement productives (PDP) pour déterminer le processus de transformation structurel, à travers une révision comparative de ces politiques en Corée, au Brésil et au Mexique. En somme, l’analyse permet d’évaluer le rôle que la spécialisation économique d’un pays peut jouer pour faciliter la transition vers des phases de développement économique plus avancées.

Suggested Citation

  • Anna Jankowska & Arne Nagengast & José Ramón Perea, 2012. "The Product Space and the Middle-Income Trap: Comparing Asian and Latin American Experiences," OECD Development Centre Working Papers 311, OECD Publishing.
  • Handle: RePEc:oec:devaaa:311-en
    DOI: 10.1787/5k9909j2587g-en
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    More about this item

    Keywords

    espace produit; exportations; exports; middle-income trap; piège du revenu intermédiaire; product space;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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