Political Economy of Middle-Income Trap Concept

Middle-income trap (MIT), being a popular concept in development economics, examines why and how middle income level countries fail to share high income level countries’ path in the long-run. Benefiting from income-based measurements and certain productive mechanisms of developing countries, this concept has been used by scholars to provide possible solutions for countries which are considered as being stuck in this trap. However, performance of institutions and, more importantly, political economy of the concept, to some degree, have been neglected by these studies. This paper, thus, argues that, in addition to macroeconomic conditions of MIT countries, political institutions of them, being inclusive or exclusive, might play a central role in determining one country’s position in the trap. In this study, first, a broad definition of MIT concept is provided. Then, institutional performances of upper-middle income countries are presented by giving weight to certain indices. In the final part, it is argued that inability of certain institutions might disable MIT countries to escape from this trap.