What is meant by the middle-income trap?

The middle-income trap refers to a situation whereby a middle-income country is failing to transition to a high-income economy due to rising costs and declining competitiveness. Few countries successfully manage the transition from low to middle to high income.

What is the middle-income poverty trap?

Middle-income trap. countries develop to a degree but fail to reach high-income status; can be due to an institutional problem; often related to low capacity for original innovation or for absorption of advanced technology and may be compounded by high inequality.

Which countries are in the middle-income trap?

Most low-income countries (LICs) aim to become middle-income countries (MICs), and many have succeeded. Yet only a few – most notably South Korea, Taiwan and Israel – have managed to continue right up to high-income status. The rest, like Argentina and South Africa, become stuck in the ‘middle-income trap’.

What is the middle-income trap China?

The “middle-income trap” is a theory of economic development in which wages in a country rise to the point that growth potential in export-driven low-skill manufacturing is exhausted before it attains the innovative capability needed to boost productivity and compete with developed countries in higher value-chain …

What is middle income trap Upsc?

The “middle-income trap” is the phenomenon of hitherto rapidly growing economies stagnating at middle-income levels (of per capita income) and failing to graduate into the ranks of high-income countries.

What is the middle income trap and why is it important for Asia?

Asian countries, having reached the middle-income level by means of an export orientation supported by low-cost labor, are seeking new paths to growth. These countries face the “middle-income trap,” a stalling of economic growth before they succeed in becoming advanced countries.

How poverty affects Pakistan’s economy?

The short run coefficient of economic growth indicates that economic growth has negative and significant effect on poverty. An increase of 1000 Pakistani rupees in per capita income decreases the percentage of people living below the poverty line by 1.6 percent.

How does poverty affect economic growth and development?

Poverty can dampen growth when market imperfections (market failures, incomplete or uncompetitive markets) combine with investment indivisibilities, fixed costs, and strategic complementarities.

Is Mexico in the middle-income trap?

Mexico has been a middle-income country for over four decades but transitioned to upper-middle-income about two decades ago. It is one of the leading emerging economies in the world.

Is South Africa in the middle-income trap?

South Africa has exhibited tepid economic growth over the past twenty years as well as high levels of income inequality characteristic of a middle income country growth trap. The paper concludes discussing the welfare outcomes on the vast majority of South Africans who are unable to participate in the economy.

Is India stuck in the middle-income trap?

The Asian Development Bank has found that unequal income distribution is another key driver of the middle-income trap and suggests higher investments in human capital to escape it. India, however, has very low levels of human capital growth for an ambitious and fast-growing major economy.

What countries have middle income trap?

The Middle-Income Trap. Countries that have been subject to the middle-income trap have had very different experiences, as shown in the figure below. Some countries—such as the Asian Tigers (Hong Kong, Singapore, South Korea and Taiwan), Spain and Ireland—have experienced rapid and persistent relative income growth.

What is the middle income country?

The term Middle Income Country (MIC) is used by the World Bank Group to refer to nation-states with a per capita Gross National Income (GNI) within a predetermined bandwidth. GNI per capita is considered to be the best indicator of the economic progress of a country.

What is the middle income group?

Middle income group is a group whose income falls in the middle of the range of the population.