OECD Development Centre Working Papers

The OECD Development Centre links OECD members with developing and emerging economies and fosters debate and discussion to seek creative policy solutions to emerging global issues and development challenges. This series of working papers is intended to disseminate the OECD Development Centre’s research findings rapidly among specialists in the field concerned. These papers are generally available in the original English or French, with a summary in the other language.

English, French

No sympathy for the devil! Policy priorities to overcome the middle-income trap in Latin America

The empirical literature on development has labelled as “middle-income trap” (MIT) the fact that many developing economies struggle to adjust to new sources of growth after reaching middle-income levels. For Latin America and the Caribbean, this is an especially challenging scenario, as only Chile, Trinidad and Tobago, and Uruguay have become high-income economies in the last six decades while several other LAC countries, already middle-income as early as 1950, stayed in that income range. This paper analyses empirically the main policy areas explaining the MIT, based on the experiences of 76 emerging economies and OECD countries, comparing those which evaded it and those which stayed there since the 1950s. Based on more than 200 000 estimations using a linear discriminant analysis, we identify institutional, social and economic features that help characterise policy priorities to overcome the middle-income trap. Furthermore, using the Synthetic Control Method, we present for selected Latin American countries their main policy gaps according to their unique characteristics.


Keywords: middle-income trap, policy, prioritisation, Latin America
JEL: O40: Economic Development, Innovation, Technological Change, and Growth / Economic Growth and Aggregate Productivity / Economic Growth and Aggregate Productivity: General; E6: Macroeconomics and Monetary Economics / Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook; O20: Economic Development, Innovation, Technological Change, and Growth / Development Planning and Policy / Development Planning and Policy: General; O1: Economic Development, Innovation, Technological Change, and Growth / Economic Development
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