Inequality and the middle‐income trap

This paper proposes an indicator measuring the likelihood for an economy to escape the middle income trap (MIT) and then estimates the impact of income inequality on this indicator using 1960‐2019 cross‐country data. Major findings include the following: (1) The likelihood of escaping MIT is relativ...

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Bibliographic Details
Published in:Journal of international development 2023-10, Vol.35 (7), p.1684-1710
Main Authors: Hu, Xiaoshan, Wan, Guanghua, Yang, Chen, Zhang, Anqi
Format: Article
Language:English
Subjects:
Accumulation
Aging
Capital formation
Human capital
Income inequality
Openness
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Summary:This paper proposes an indicator measuring the likelihood for an economy to escape the middle income trap (MIT) and then estimates the impact of income inequality on this indicator using 1960‐2019 cross‐country data. Major findings include the following: (1) The likelihood of escaping MIT is relatively large for Asia, followed by Europe, Africa, North America and South America. (2) Inequality is negatively and significantly correlated with the MIT indicator, particularly in freer, high‐income and MIT country groups. (3) Regarding the mechanisms, domestic investment, human capital accumulation and trade openness contribute positively to this indicator, while ageing does the opposite.
ISSN:0954-1748
1099-1328
DOI:10.1002/jid.3747