middle income trap

Syllable breakdown

Dictionary meaning

a development condition in which a country that has achieved middle-income status through low-cost manufacturing and resource exports finds itself unable to advance further to high-income status because it can no longer compete with lower-cost developing countries in labour-intensive industries while simultaneously lacking the productivity, innovation capacity, and institutional sophistication to compete with advanced economies in knowledge-intensive sectors; the concept was introduced by economists at the World Bank in 2007 and has been used to analyse the trajectories of Latin American economies including Brazil and Mexico — which achieved middle-income status in the 1970s and 1980s but stagnated — in contrast to the East Asian economies including South Korea and Taiwan that successfully transitioned to high income; escaping the middle-income trap requires investments in education, innovation systems, institutional quality, and industrial upgrading that many middle-income governments struggle to sustain politically and fiscally