OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

The middle income plateau

Trap or springboard?

The mixed growth performance of emerging market economies has revived angst about a "middle-income trap". However, a forensic review of statistical evidence shows that middle-income countries “escape” to higher income levels more often than both poorer and richer countries. At the same time, growth slowdowns are also more frequent in this group. Recent econometric research confirms that the impact of economic policies on GDP growth is greater at middle than at lower and higher income levels. Middle-income countries harvest higher returns from structural reforms, but also meet special political economy obstacles in implementing them. The resulting policy divergences imply differences in performance, reflecting notably the uneven expansion of their high-productivity entrepreneurial firms. The paper highlights the channels through which performance improves when obstacles to policy innovations are overcome and reforms are implemented.


Keywords: middle-income countries, institutions, entrepreneurship, human capital, Economic growth, productivity convergence, financial deepening, rule of law
JEL: E02: Macroeconomics and Monetary Economics / General / Institutions and the Macroeconomy; O17: Economic Development, Innovation, Technological Change, and Growth / Economic Development / Formal and Informal Sectors; Shadow Economy; Institutional Arrangements; D02: Microeconomics / General / Institutions: Design, Formation, Operations, and Impact; B15: History of Economic Thought, Methodology, and Heterodox Approaches / History of Economic Thought through 1925 / History of Economic Thought through 1925: Historical; Institutional; Evolutionary; L26: Industrial Organization / Firm Objectives, Organization, and Behavior / Entrepreneurship; O10: Economic Development, Innovation, Technological Change, and Growth / Economic Development / Economic Development: General; P48: Economic Systems / Other Economic Systems / Other Economic Systems: Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
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