Abstract:

The concept of middle income trap (MIT) refers to a situation where countries with relatively high growth rates reach the middle income level but then face difficulties in arriving at high income levels. One of the basic economic problems of middle-income countries is being unable to continue their growth performance they had at low-income level to move towards high-income. The aim of this study is to analyze the factors determining the MIT with a sample of the selected 16 countries in the upper-middle income group for the 1996-2015 period. In model, GDP (Y) is dependent variable, and R&D expenditures (ARGE), openness (DAO), internet use rate (IKO), education expenditures (EH), labor productivity (IV), number of published scientific papers (BMK), inflation rate (ENF) and unemployment rate (IO) used as independent variables determining MIT. A cointegration relationship between the dependent variable and independent variables were determined. With results of the panel causality analysis, one-way causality relationship from Y to DAO and ARGE variables, and from IKO, IV and BMK variables to Y; and a two-way causality between Y, and IO and EH variables were found. There is no causality relationship between Y and ENF variables. Using empirical findings obtained, policy recommendations to avoid or get rid of MIT have been provided.

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