Middle Income Trap and Challenges Facing Developing Countries

Abstract

The middle-income trap is becoming a topic that attracts many governments’ interest. The development experience has shown that only a few countries have succeeded in escaping the middle-income trap since the 1960s. The paper focuses on the differences in the development context between the current middle-income countries and the groups of countries that have successfully industrialized. The research results show that the countries that had escaped the middle-income trap had higher human resource quality, especially evident in the proportion of people involved in research and development activities. They also had lower inequality and informal sector. In particular, these countries had a deeper linkage with the foreign invested sector in upgrading technology during the development process. Therefore, the paper points out the important prepositions that the current middle-income countries need to implement if they want to overcome the middle-income trap.