Re-examining the Middle-Income Trap Hypothesis (MITH): What to Reject and What to Revive?

Xuehui Han, Shang-Jin Wei

NBER Working Paper No. 23126
Issued in February 2017
NBER Program(s):Development Economics

Do middle-income countries face difficult challenges producing consistent growth? Using transition matrix analysis, we can easily reject any unconditional notion of a “middle-income trap” in the data. However, countries have different fundamentals and policies. Using a nonparametric classification technique, we search for variables that separate fast- and slow-growing countries. For middle-income countries, a relatively large working age population, sex ratio imbalance, macroeconomic stability, and financial development appear to be the key discriminatory variables. We do the same exercise for low-income countries. This framework yields conditions under which countries in the low- and middle-income ranges move forward or backward, or are trapped.

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Document Object Identifier (DOI): 10.3386/w23126

Published: Han, Xuehui & Wei, Shang-Jin, 2017. "Re-examining the middle-income trap hypothesis (MITH): What to reject and what to revive?," Journal of International Money and Finance, Elsevier, vol. 73(PA), pages 41-61. citation courtesy of

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