Avoiding the Trap: An Empirical Investigation

This chapter examines the growth performance of countries at different income status with particular attention to middle-income countries in Africa. Using a cross-country framework and a wealth of variables associated with economic growth during a 40-year period, it identifies the factors that contribute to growth for low-income, middle-income, and high-income countries around the globe. The separate treatment of countries by income group supports widespread parameter heterogeneity. Expanding the analysis to also consider the middle-income countries that successfully graduated to high-income status, as well as those that have succumbed into a middle-income trap, it further establishes the growth determinants that are most important for (i) facilitating a smooth transition and (ii) avoiding being trapped in the middle. The results are then used to guide the prioritization of policies for middle-income countries in Africa by developing a “Heat Map” that performs a ranking analysis for each such country with respect to every factor found to affect growth in this country income group. The map illustrates the areas that require most attention by each country to accelerate transition to high-income status, supporting the argument that every country needs a different mix of policy priorities to achieve this objective.