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Middle-income growth traps

  • Agenor, Pierre-Richard
  • Canuto, Otaviano

This paper studies the existence of middle-income growth traps in a two-period overlapping generations model of economic growth with two types of labor and endogenous occupational choices. It also distinguishes between"basic"and"advanced"infrastructure, with the latter promoting design activities, and accounts for a knowledge network externality associated with product diversification. Multiple steady-state equilibria may emerge, one of them taking the form of a low-growth trap characterized by low productivity growth and a misallocation of talent -- defined as a relatively low share of high-ability workers in design activities. Improved access to advanced infrastructure may help escape from that trap. The implications of other public policies, including the protection of property rights and labor market reforms, are also discussed.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6210.

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Date of creation: 01 Sep 2012
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Handle: RePEc:wbk:wbrwps:6210
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  1. Perez-Sebastian, Fidel, 2007. "Public support to innovation and imitation in a non-scale growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 31(12), pages 3791-3821, December.
  2. Chui, Michael & Currie, David & Levine, Paul L & Pearlman, Joseph, 1996. "Phases of Imitation and Innovation in a North-South Endogenous Growth Model," CEPR Discussion Papers 1489, C.E.P.R. Discussion Papers.
  3. Iacopetta, Maurizio, 2010. "Phases of economic development and the transitional dynamics of an innovation-education growth model," European Economic Review, Elsevier, vol. 54(2), pages 317-330, February.
  4. Weinberg, Bruce A., 2011. "Developing science: Scientific performance and brain drains in the developing world," Journal of Development Economics, Elsevier, vol. 95(1), pages 95-104, May.
  5. Canuto, Otaviano & Dutz, Mark & Reis, José Guilherme, 2010. "Technological Learning and Innovation: Climbing a Tall Ladder," World Bank - Economic Premise, The World Bank, issue 21, pages 1-8, July.
  6. Commission on Growth and Development, 2008. "The Growth Report : Strategies for Sustained Growth and Inclusive Development," World Bank Publications, The World Bank, number 6507.
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