The Middle-Income Transition around the Globe: Characteristics of Graduation and Slowdown

The paper investigates the situation of middle-income economies around the world. Since 1965, only 18 economies with a population of more than 3 million and not dependent on oil exports have made the transition to being high income. Many more have not been able to move beyond the middle-income stage. We conduct statistical tests of differences between two groups of economies across a range of growth and development variables. The results suggest that middle-income economies are particularly weak in the following areas: governance, infrastructure, savings and investment, inequality, and quality—but not quantity—of education. The findings are used to suggest whether the People's Republic of China is successfully progressing through the middle-income stage or whether it may get caught in a middle-income trap.