The middle income trap

The middle income trap is a theorized economic development situation, where a country which attains a certain income (due to given advantages) will get stuck at that level.[1]The concept was coined in 2007.[2]

A country in the middle income trap will have lost their competitive edge in the exportation of manufactured goods because their wages are on a rising trend. However, they are unable to keep up with economically more developed economies in the high-value-added market. As a result, newly industrialised economies such as South Africa and Brazilhave not, for decades, left what the World Bank defines as the ‘middle-income range’ since their per capita gross national product has remained between $10,000 to $12,000 at constant (2011) prices.[1] They suffer from low investment, slow growth in the secondary industry, limited industrial diversification and poor labor market conditions.[3]

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