Re-Examining the Middle-Income Trap Hypothesis (Mith): What to Reject and What to Revive?

43 Pages Posted: 7 Feb 2017 Last revised: 13 Feb 2017

See all articles by Xuehui Han

Xuehui Han

Shang-Jin Wei

Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); International Monetary Fund (IMF); Tsinghua University - School of Economics & Management

Date Written: February 2017

Abstract

Do middle-income countries face difficult challenges producing consistent growth? Using transition matrix analysis, we can easily reject any unconditional notion of a “middle-income trap” in the data. However, countries have different fundamentals and policies. Using a nonparametric classification technique, we search for variables that separate fast- and slow-growing countries. For middle-income countries, a relatively large working age population, sex ratio imbalance, macroeconomic stability, and financial development appear to be the key discriminatory variables. We do the same exercise for low-income countries. This framework yields conditions under which countries in the low- and middle-income ranges move forward or backward, or are trapped.

Suggested Citation

Han, Xuehui and Wei, Shang-Jin, Re-Examining the Middle-Income Trap Hypothesis (Mith): What to Reject and What to Revive? (February 2017). NBER Working Paper No. w23126, Available at SSRN: https://ssrn.com/abstract=2912099

Shang-Jin Wei

Columbia Business School - Finance and Economics ( email )

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National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

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United Kingdom

International Monetary Fund (IMF)

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Washington, DC 20431
United States

Tsinghua University - School of Economics & Management

Beijing, 100084
China

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