The Mechanism of the Middle Income Trap and the Potential Factors Influencing China’s Economic Growth

Abstract

Data from WDI show that developing countries are easily caught in the “middle income trap.” To interpret the mechanism of the “middle income trap,” this paper focuses on: (1) Based on the empirical framework of economic growth, we perform an empirical research on the determinants of economic growth at different income levels and discover that fixed capital investment, FDI and human capital accumulation are the main factors influencing less developed economies while for the upper middle income level and high-income level countries, the engines of economic growth change to institutions and R&D. (2) We discuss the possible reasons why developing countries can have rapid economic growth before reaching the middleincome level, but cannot transform growth mechanisms in the middle income level. (3) We classify the factors that have influenced China’s economic growth since the reform and analyze the potential ones for China’s future development.

Keywords

middle income trap / economic growth / growth mechanisms

RIGHTS & PERMISSIONS

2014 Higher Education Press and Brill