Discussion paper
DP19346 At the Threshold: The Increasing Relevance of the Middle-Income Trap
We investigate the existence of a middle-income trap using finite state Markov chains, constant growth thresholds, and mean first 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 relative 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. A middle-income trap may become increasingly apparent in the years to come.
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