Working Paper: CEPR ID: DP10989
Authors: Xuehui Han; Shangjin Wei
Abstract: 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 non-parametric 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 are trapped or even move backward.
Keywords: low-income trap; middle-income trap; regression tree; sex ratio imbalance
JEL Codes: C14; C30; F01; O11; O43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| large working-age population (J21) | higher growth rates (O49) |
| sex ratio imbalance (J79) | higher growth rates (O49) |
| macroeconomic stability (E60) | higher growth rates (O49) |
| financial development (O16) | higher growth rates (O49) |
| favorable demographics (J11) | higher growth rates (O49) |
| unfavorable conditions (Q54) | stagnation or regression (P27) |
| higher sex ratio in premarital cohort (J12) | faster economic growth (O49) |
| demographic factors (J11) | growth outcomes for low-income countries (O55) |
| macroeconomic management (E60) | growth outcomes for low-income countries (O55) |
| demographic factors and macroeconomic management (J11) | growth outcomes (O40) |