The Middle-Income Trap: Navigating the Ambiguity of the Concept

This study examines the middle-income trap hypothesis, a concept widely debated in economic literature. This a situation in which economic growth slows down after reaching a middle level and the country is unable to move into the group of high-income countries for a long time. It occurs when the initial successes of industrialisation gradually become exhausted and new growth incentives are not formed quickly enough. But can we really be certain whether a country has fallen into the “trap”? The latter is not a rhetorical question — of the 92 countries classified as middle-income economies by the World Bank in 2000, 27 have moved into the high-income group. The study aims to systematize numerous definitions of the concept and assess how definitional differences influence conclusions about development paths and income group transitions. An econometric analysis reveals that these differences have minimal impact on the factors affecting transition probabilities, making discussions about the fundamentals of trap formation largely definition-independent. Econometric testing also confirms a long-term relationship between sharp economic slowdowns and upward income transitions. At the same time, the definitional diversity complicates applying the hypothesis to specific countries.