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Economic Convergence, Capital Accumulation, and Income Traps: Empirical Evidence

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  • Cyn-Young Park

    (Ecoonomics Research and Regional Cooperation, Asian Development Bank)

  • Rogelio Mercado Jr.

    (Newcastle Business School, Northumbria University)

Abstract

This paper aims to examine the factors that increase the likelihood of economic transition to higher income status; that is, it tries to answer the question of why some economies move to a higher income country group while others do not. Using a quintile income distribution approach, we identify 62 economies that moved to a higher quintile income group from 1960 to the 2010s out of a sample of 182 economies. Our findings show that higher physical and human capital growth and oil revenues are significantly associated with a greater probability of transitioning to higher quintile income group, although their effects vary not only across income groups within a sample period but also across different periods. Our results indicate that economies that have attained substantial capital accumulation (either physical or human, or combination thereof) and/or are blessed with oil resources have avoided income traps and demonstrated a successful and often steady transition to higher income groups.

Suggested Citation

  • 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.
    • Handle: RePEc:tcd:tcduee:tep1117
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    2. Vicente German‐Soto & Konstantin Gluschenko, 2023. "Long‐term regional convergence in Mexico: A new look," Review of Development Economics, Wiley Blackwell, vol. 27(2), pages 963-991, May.

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    More about this item

    Keywords

    economic convergence; capital accumulation; middle-income trap;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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