middle income trap

In 2010, the World Bank categorized countries in per capita gross domestic product in terms of purchasing power parity (at constant 1990 prices) in three categories: low, middle (lower and upper) and high income. If a country caught at least 28 years in lower middle income level and at least 14 years caught in upper middle-income level, then they are trapped in lower middle and upper middle income traps respectively. The growth of per capita GDP or economic growth, is a factor in avoiding middle income trap. We examined the effect of total factor productivity, human capital and age dependency ratios on GDP per capita growth and the avoidance of middle income trap during 1991 - 2014 for ten Islamic countries, using panel data and constant effects estimation. The findings indicate that human capital and then total factor productivity have positive and significant relationship with per-capita GDP and have the greatest impact on economic growth and the avoidance from middle income trap. If the ratio of age dependency is high, it has a positive and significant effect on economic growth and can keep the country in the middle income trap.

In 2010, the World Bank categorized countries by GDP (at Purchasing Power Parity) per capita (at constant 1990 prices) in three categories: low, middle (low and high), and high. If a country falls in a trap at least 28 years in the low middle income and at least 14 years in the high middle income group, then it is included in low and middle income groups, respectively .In this paper, using the experience of successful countries in avoiding the trap, we investigated the impact of investment, human capital, high-tech exports, total factor productivity, exports of goods and services, and the value added of service sectors on per capita GDP growth during 1991-2014, using panel data. Research findings in the literature indicated that in selected Asian countries, human capital and total factor productivity growth with positive and significant effects have the greatest impact on avoiding the trap. In the case of Iran, human capital and the total factor productivity growth have positive and significant effects on the economic growth, but such effects have not been so great to help escaping Iran’s economy from the middle- income trap. Therefore, Iran has remained in the middle- income trap over the past 58 years. JEL Classification: J24, D24, E22, C33.