Caught in the Middle? The Economics of Middle‐Income Traps

21 Pages Posted: 12 Jun 2017

See all articles by Pierre-Richard Agenor

Pierre-Richard Agenor

University of Manchester - School of Social Sciences

Date Written: July 2017

Abstract

This paper provides an overview of the recent analytical and empirical literature on middle‐income traps. The first part examines the descriptive and statistical evidence on these traps. The second discusses the various arguments that have been put forward to explain the existence, and persistence, of middle‐income traps. These arguments include diminishing returns to physical capital, exhaustion of cheap labor and imitation gains, insufficient quality of human capital, inadequate contract enforcement and intellectual property protection, distorted incentives and misallocation of talent, lack of access to advanced infrastructure, and lack of access to finance, especially in the form of venture capital. The third part considers public policies aimed at avoiding, and escaping from, middle‐income traps. The concluding part identifies a number of directions in which the empirical and theoretical literature could fruitfully evolve.

Keywords: Access to finance, Access to infrastructure, Imitation and innovation, Middle‐income traps, Multiple growth equilibria, Skills acquisition

Suggested Citation

Agenor, Pierre-Richard, Caught in the Middle? The Economics of Middle‐Income Traps (July 2017). Journal of Economic Surveys, Vol. 31, Issue 3, pp. 771-791, 2017. Available at SSRN: https://ssrn.com/abstract=2984374 or http://dx.doi.org/10.1111/joes.12175

Pierre-Richard Agenor (Contact Author)

University of Manchester - School of Social Sciences ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

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