Challenges in Escaping Middle-Income Trap in Selected Asian Countries

Abstract

Middle Income Trap (MIT) refers to a phenomenon in which middle –income countries fail to transition to high-income level and experience sustained growth slowdowns or long-term economic stagnation. Using panel data from 1980-2017 for 10 Asian countries, the current study examines the economic and institutional factors affecting the level of GNI per capita. A Fixed Effects Model is selected for the estimation purpose. The findings suggest that high tech exports and tertiary school enrollment exert statistically significant effect on the level of GNI per capita. Very few studies have analyzed the effect of financial liberalization in the context of MIT. The study finds that financial liberalisation , measured by M2/GDP has a strong and robust effect on growth. Similarly, life expectancy-an overall health indicator-is a significant variable in explaining the level of GNI Per Capita. The study finds that government effectiveness indicator has a positive and strong effect on the level of GNI Per Capita. The research provides an additional evidence on the existing debate, using the most recent data.