At the Threshold: The Increasing Relevance of the Middle-Income Trap

By Patrick A. Imam, Jonathan R. W. Temple

April 26, 2024

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Patrick A. Imam, and Jonathan R. W. Temple At the Threshold: The Increasing Relevance of the Middle-Income Trap, (USA: International Monetary Fund, 2024) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We investigate the existence of a middle-income trap using finite state Markov chains, constant growth thresholds, and mean passage times. As well as studying output per head, we examine the dynamics of its proximate determinants: TFP, the capital-output ratio, and human capital. We find upwards mobility for the capital-output ratio and human capital, but not for relative TFP. The lack of upwards mobility in relative TFP, at least from an intermediate level, suggests that escaping the middle-income category can take many years, and such traps may become increasingly apparent in the years to come.

Subject: Capital productivity, Human capital, Income, Labor, National accounts, Production, Total factor productivity

Keywords: Aggregate development, Capital productivity, Economic growth, Global, Growth slowdown, Human capital, Income, Jonathan R.W. Temple, Middle-income country, Middle-income trap, No. 24/91, Passage time, Total factor productivity

Publication Details

Pages:

45
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2024/091
Stock No:

WPIEA2024091
ISBN:

9798400274855
ISSN:

1018-5941

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