Approaches to Identify the Middle Income Trap and Episodes of Growth Slowdown

Abstract

Economic growth and human wellbeing from the perspective of cross-country differences of income are among the core and fundamental concern. This study analyzes the episodes of persistent and aggravated growth slowdown commonly known as middle income trap by employing the data for 183 countries over the period 1960 to 2021. We attempt to identify the middle-income trap by using absolute income approach based on different criteria. Considering the neoclassical growth model and theoretical framework of conditional convergence, we also attempt to identify the middle-income trap by using relative income approach. Based on two approaches, the results identify existence of middle-income trap in different parts of the world, particularly in East Asia, Latin America and Middle East region. Findings of the study are beneficial for policy implications regarding strategies to counter the presence of inertia and growth slowdown in income transition in MICs which may be helpful to a great extend in avoiding the MIT.