Growth Slowdowns and the Middle-Income Trap

65 Pages Posted: 9 Apr 2013

See all articles by Shekhar S. Aiyar

Shekhar S. Aiyar

International Monetary Fund (IMF)

Romain Duval

International Monetary Fund (IMF)

Damien Puy

International Monetary Fund (IMF)

Yiqun Wu

International Monetary Fund (IMF)

Longmei Zhang

International Monetary Fund (IMF)

Date Written: March 2013

Abstract

The “middle-income trap” is the phenomenon of hitherto rapidly growing economies stagnating at middle-income levels and failing to graduate into the ranks of high-income countries. In this study we examine the middle-income trap as a special case of growth slowdowns, which are identified as large sudden and sustained deviations from the growth path predicted by a basic conditional convergence framework. We then examine their determinants by means of probit regressions, looking into the role of institutions, demography, infrastructure, the macroeconomic environment, output structure and trade structure. Two variants of Bayesian Model Averaging are used as robustness checks. The results - including some that indeed speak to the special status of middle-income countries - are then used to derive policy implications, with a particular focus on Asian economies.

JEL Classification: C11, C25, O11, O43, O47

Suggested Citation

Aiyar, Shekhar S. and Duval, Romain and Puy, Damien and Wu, Yiqun and Zhang, Longmei, Growth Slowdowns and the Middle-Income Trap (March 2013). IMF Working Paper No. 13/71, Available at SSRN: https://ssrn.com/abstract=2247223

Shekhar S. Aiyar

International Monetary Fund (IMF) ( email )

700 19th Street NW - HQ 5-403
Washington, DC 20431
United States
202-623-8638 (Phone)

Romain Duval

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Damien Puy

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Yiqun Wu

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Longmei Zhang

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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