World Bank Note: Avoiding Middle-Income Growth Traps

Click "Display Images" above to view this banner

Avoiding Middle-Income Growth Traps

Authors: Pierre-Richard Agénor, Otaviano Canuto, and Michael Jelenic

Since the 1950s, rapid growth has allowed a significant number of countries to reach middle-income status; yet, very few have made the additional leap needed to become high-income economies. Rather, many developing countries have become caught in what has been called a middle-income trap, characterized by a sharp deceleration in growth and in the pace of productivity increases. Drawing on the findings of a recently released working paper (Agénor and Canuto 2012), as well as a growing body of research on growth slowdowns, this note provides an analytical characterization of “middle-income traps” as stable, low-growth economic equilibria where talent is misallocated and innovation stagnates. To counteract middle-income traps, there are a number of public policies that governments can pursue, such as improving access to advanced infrastructure, enhancing the protection of property rights, and reforming labor markets to reduce rigidities — all implemented within a context where technological learning and research and development (R&D) are central to enhancing innovation. Such policies not only explain why some economies — particularly in East Asia — were able to avoid the middle-income trap, but are also instructive for other developing countries seeking to move up the income ladder and reach high-income status.


The Economic Premise notes are produced by the Poverty Reduction and Economic Management (PREM) Network Vice-Presidency of the World Bank. The views expressed here are those of the authors and do not necessarily reflect those of the institution.

To read previous Economic Premise notes, please click here: www.worldbank.org/economicpremise

Economic Premise is now a partner of Roubini Global Economics and is available on RGE’s Partner Content: www.roubini.com/partnercontent.

PREM’s Twitter feed tracks the World Bank’s efforts to help countries fight poverty and close gaps in income and opportunity. Follow us at twitter.com/WBPoverty.

To subscribe to this Economic Premise update click here, to unsubscribe click here, or to send comments email us at economicpremise@worldbank.org.

Leave a Reply

Barbados Coalition Of Service Industries

Barbados Coalition Of Service Industries

Tel: +1 (246) 429-5357
Fax: +1 (246) 429-5352
Email : info@bcsi.org.bb

Building #2, Suite 1A

Manor Lodge Complex

Lodge Hill

St. Michael, Barbados

Contact Us