This article argues against the idea that countries with middle range GDP per capita are destined to hit a growth slump. The "middle income trap" is based on the facts that high income economies have the best technologies and low income economies have cheap labor, while those in between lack a competitive edge. Using China as an example, it claims that as the labor force moves from agriculture to urban industrial work, productivity will decline and the country will face a difficult jump from one model to the other. What this theory ignores, however, is that productivity and change in models are continuous: they don't wait until the end of one system is complete to begin increasing productivity in the other. As the article says, as long as wage and productivity stay in line with one another, an economy can remain competitive.
http://www.economist.com/news/finance-and-economics/21571863-do-countries-get-trapped-between-poverty-and-prosperity-middle-income-claptrap
1 comment:
I can see how it may seem like a country does not have a competitive edge when it is not overly strong in one area or another, but having a decent level in multiple areas provides its own benefits. This is the case in many games and could very well be the case when considering countries’ well-being as well.
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