Why Some Countries Can Survive the Middle-Income Trap – Based on an Empirical Analysis of Different Countries and Regions
Xiaoshan Liu, Xindong Zhao, Fang Zhao
Keywords:
middle-income trap, economic growth, international comparison, variable coefficient panel model
Abstract:
The middle-income trap fundamentally reflects a challenge in sustaining economic growth. To escape this trap, it is essential to identify sources of sustainable growth. This study systematically investigates the factors that facilitate overcoming the middle-income trap by using panel data from 29 countries spanning 1990 to 2022. A double fixed-effects model and a variable coefficient model are employed to empirically assess the impact of economic structural transformation, institutional quality, openness, and participation in global value chains on escaping the middle-income trap. The results indicate that, on a broad scale, patent applications and global value chain positioning positively influence the economic growth of countries that have successfully crossed the trap, suggesting these factors are conducive to overcoming it. Political institutional quality and goods trade also positively affect the growth of both groups of countries, although their influence on escaping the trap is not decisive. Further analysis, incorporating national endowments, reveals that human capital, patent applications, and industrial upgrading generally foster growth in countries that have transcended the trap. Institutional quality notably enhances growth in countries with stronger institutions, while foreign investment, goods trade, and global value chain status positively impact countries with greater openness to the global economy. These findings underscore the importance of considering a country’s unique resource endowments in the pursuit of economic growth. Finally, policy recommendations are made in four areas: industrial upgrading and technological innovation, education reform and skills training, political system reform and governance capacity building, and enhancing national cooperation and openness.
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 10.7441/joc.2025.03.09
Liu, X., Zhao, X., & Zhao, F. (2025). Why some countries can survive the middle-income trap – Based on an empirical analysis of different countries and regions. Journal of Competitiveness, 17(3), 222-254. https://doi.org/10.7441/joc.2025.03.09
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