Growth Slowdowns and the Middle-Income Trap
IMF Working Papers, March 20, 2013
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Bibliographic details
- Authors: Shekhar Aiyar, Romain A Duval, Damien Puy, Yiqun Wu, Longmei Zhang
- Published: March 20, 2013
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484330647.001
Overview
- Definition: The “middle-income trap” is the phenomenon of hitherto rapidly growing economies stagnating at middle-income levels and failing to graduate into the ranks of high-income countries.
- Research focus: The study examines the middle-income trap as a special case of growth slowdowns, defined as large sudden and sustained deviations from the growth path predicted by a basic conditional convergence framework.
- Authors: Shekhar Aiyar, Romain A Duval, Damien Puy, Yiqun Wu, Longmei Zhang
- Date: March 20, 2013
- Pages: 64
Methodology
- Identification of slowdowns:
- Growth slowdowns are identified as large sudden and sustained deviations from the growth path predicted by a basic conditional convergence framework.
- Determinants analysis:
- Probit regressions are used to examine determinants, focusing on:
- Institutions
- Demography
- Infrastructure
- The macroeconomic environment
- Output structure
- Trade structure
- Robustness checks:
- Two variants of Bayesian Model Averaging are used as robustness checks.
Key empirical findings (as summarized)
- Some results indicate a special status of middle-income countries with respect to growth slowdowns and the middle-income trap.
- Determinants highlighted in the analysis include institutional quality, demographic factors (including fertility rate), infrastructure and public investment, macroeconomic environment, and structural features of output and trade.
Policy implications (with particular focus on Asian economies)
- The results are used to derive policy implications for avoiding or overcoming growth slowdowns and the middle-income trap, with a particular focus on Asian economies.
- Policy-relevant themes emphasized by the study include:
- Strengthening institutions
- Addressing demographic challenges (e.g., fertility rate considerations)
- Investing in infrastructure and public investment and public-private partnerships (PPP)
- Maintaining a supportive macroeconomic environment
- Managing output structure and trade structure to sustain growth
Subject areas and keywords (as provided)
- Subjects: Balance of payments, Capital inflows, Economic integration, Expenditure, Income, Infrastructure, National accounts, Public investment and public-private partnerships (PPP), Regional integration
- Keywords: Asia and Pacific, Bayesian Model Averaging, Capital inflows, East Asia, economic growth, fertility rate, growth, Income, Infrastructure, middle income trap, middle-income economy, per capita income, physical capital, Public investment and public-private partnerships (PPP), rate of growth, Regional integration, relative frequency, simple average, slowdown, time series, WP