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What Is the Middle Income Trap, Why do Countries Fall into It, and How Can It Be Avoided?

Author

Listed:
  • Homi Kharas

    (Senior Fellow and Deputy Director of the Global Economy and Development Program, Brookings Institution, Washington DC. E-mail: hkharas@brookings.edu)

  • Harinder Kohli

    (Editor, Global Journal of Emerging Market Economies, President & CEO, Emerging Market Forum and Centennial Group, Washington DC. E-mail: harinder@centennial-group.com)

Abstract

The risks of falling into the Middle Income Trap have increasingly become a focus of discussions on the long-term economic and social development prospects of developing countries. These risks, and how to minimize them, are being debated at the highest levels of policy making in some of the fastest growing emerging economies, even while these countries remain a source of envy to the rest of the world. The term Middle Income Trap is by now also being widely used in economic literature as well as business-oriented media. We draw satisfaction from the fact that some of our previous writings (Gill and Kharas, 2008; Kohli et al. 2009) (co-authored with other colleagues) seem to have helped popularize this term. At the same time, we realize that some have interpreted and used the term quite differently from what we had in mind when we first introduced the term Middle Income Trap in our writings and presentations. This article offers our perspective as to what the Middle Income Trap is, why so many countries fall into it, and the key challenges involved in avoiding the trap. With policy makers as its primary audience, the article is deliberately short in length and straightforward in language.

Suggested Citation

  • Homi Kharas & Harinder Kohli, 2011. "What Is the Middle Income Trap, Why do Countries Fall into It, and How Can It Be Avoided?," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 3(3), pages 281-289, September.
    • Handle: RePEc:sae:emeeco:v:3:y:2011:i:3:p:281-289
    DOI: 10.1177/097491011100300302
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    Citations

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    Cited by:

    1. Andrés Zahler & Leonardo Iacovone & Aaditya Mattoo, 2014. "Trade and Innovation in Services: Evidence from a Developing Economy," The World Economy, Wiley Blackwell, vol. 37(7), pages 953-979, July.
    2. Claudio Loser & José Fajgenbaum, 2012. "A New Vision for Mexico 2042: Achieving Prosperity for All," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 4(2), pages 155-195, May.
    3. Harpaul Alberto Kohli & Y. Aaron Szyf & Drew Arnold, 2012. "Construction and Analysis of a Global GDP Growth Model for 185 Countries through 2050," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 4(2), pages 91-153, May.
    4. Theodore Ahlers & Hiroshi Kato & Harinder S. Kohli & Callisto Madavo & Anil Sood (ed.), 2014. "Africa 2050: Realizing the Continent's Full Potential," Books, Emerging Markets Forum, edition 1, number africa2050, May.
    5. Jesus Felipe & Utsav Kumar & Reynold Galope, 2017. "Middle-income transitions: trap or myth?," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 22(3), pages 429-453, July.
    6. Jungsuk Kim & Jungsoo Park, 2018. "The Role of Total Factor Productivity Growth in Middle-Income Countries," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(6), pages 1264-1284, May.
    7. Paus, Eva, 2014. "Latin America and the middle-income trap," Financiamiento para el Desarrollo 36816, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    8. Lim, King Yoong, 2019. "Industrial Transformation With Heterogeneous Labor And Foreign Experts," Macroeconomic Dynamics, Cambridge University Press, vol. 23(8), pages 3225-3266, December.
    9. Yao, Yang, 2014. "The Chinese Growth Miracle," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 7, pages 943-1031, Elsevier.
    10. Nabeshima, Kaoru & Ito, Tadashi & Tanaka, Kiyoyasu & Kashcheeva, Mila & Bullon, David & Sanchez, Natalia, 2015. "The source of sustainable growth in Costa Rica," IDE Discussion Papers 500, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    11. Gill,Indermit S. & Kharas,Homi, 2015. "The middle-income trap turns ten," Policy Research Working Paper Series 7403, The World Bank.

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