Middle-Income Trap. Is there a way out?

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Essay from the year 2017 in the subject Business economics - Economic Policy, grade: Distinction, London School of Economics, lang...

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Essay from the year 2017 in the subject Business economics - Economic Policy, grade: Distinction, London School of Economics, language: English, abstract: Middle-income trap has become a well-known phenomenon with a large number of countries falling into the trap and getting stagnated. The article is an attempt to investigate whether falling into the Middle-income trap is inevitable or there is a way out through in-depth review of secondary research. The article argues, supported by previous empirical and descriptive evidence, that countries (and regions within) are not systematically bound to fall into a MI trap, rather, certain determinants, such as institutions, economic structure, infrastructure and other factors make countries (and regions within) more susceptible to a MI trap. It discusses how the complex economic structure of a MI country (and region within) requires a shift to capital intensive, innovation- driven efficient economy to make a timely transition to HI economy. It also highlights the need for a certain level of infrastructure to capture the benefits of an export-based economy. Moreover, decentralization, inequality and demography play significant role in intensifying the MI trap period affecting growth. Therefore, the article concludes, while some countries (and regions within) fall into a MI trap and stagnate, others do not, due to uneven condition of their determinants.