INTRODUCTION

“Middle-income trap” is a concept of recent origin, but is already a household word in the foreign aid community, think-tanks, government agencies, and the popular press in Asia. A Google search of “middle-income trap” yields tens of thousands of results, but a search on IDEAS (the Internet database of economics articles and working papers) produces no more than a handful of references to the subject, which suggests that while the middle-income trap is a popular concept, especially in Asia, it is not one that economists have yet taken seriously.

The notion of a middle-income trap is associated with a slowdown of long-term growth somewhere in the middle-income range. But the slowing down of growth in developing countries, according to conventional growth theory, is a natural and inevitable consequence of diminishing returns to capital-deepening and technology catch-up. Those who allude to a middle-income trap as an explanation for growth slowdown, however, generally ignore natural causes and instead attribute the slowing down of growth to various policies middleincome countries take that inhibit growth and others they fail to take that would promote it.

Even if growth slowdown can be attributed, inter alia, to policy acts of omission and/or commission, the trap metaphor is not necessarily warranted. For, if all that is necessary to accelerate growth is to adopt different policies, how can a country be considered trapped? The trap metaphor would only be appropriate if there were some external constraint (e.g. politics) that prevented and/or discouraged authorities in middle-income countries from taking the necessary measures to restore growth to its long-run potential.