While the Middle-Income Trap (MIT) has gained popularity
in Europe, Asia and America in the past 15 years, little data exists about its
impact on Africa. This is because, until recently, Africa had recorded minimal
economic growth. However, since the year 2000, several African countries have
recorded rapid economic growth to attain middle-income status, but very few
have transitioned to high-income levels. This study aimed to establish Zambia’s
standing regarding the MIT. A unit root model was used to test for income
convergence between Zambia and the United States of America (US). In line with
the study model, income convergence is equivalent to the absence of unit root
in the natural log difference in per capita income between the US and Zambia.
The Augmented Dickey-Fuller, Phillips-Perron test which accounts for serial
correlation and GLS detrended augmented Dickey-Fuller test were used to test for the unit root. All
tests identified unit root indicating the lack of GDP per capita convergence
between Zambia and the US. These results indicate Zambia is at a high risk of
falling into MIT. To break from the MIT, Zambia should diversify its economy
and shift from input led growth to growth based on economic efficiency. The
lack of sustained economic growth in Zambia is due to 1) the inability to
identify new growth drivers at the middle-income stage, 2) failure to institute
the required political and institutional reforms to sustain growth at MIC
level.
References
[1]
Agenor, P.-R. (2016). Caught in the Middle? The Economics of Middle-Income Traps. Journal of Economic Surveys, 31, 771-791. https://doi.org/10.1111/joes.12175
[2]
Agenor, P.-R., & Canuto, O. (2012). Middle-Income Growth Traps. World Bank Policy Research Working Paper No. 6210. https://doi.org/10.1596/1813-9450-6210
[3]
Aiyar, S., Duval, R., Puy, D., Wu, Y. Q., & Zhang, L. M. (2013). Growth Slowdowns and the Middle-Income Trap. IMF Working Paper 6.
https://doi.org/10.5089/9781484330647.001
[4]
Albuquerque, E. D. (2019). Brazil and the Middle-Income Trap: Its Historical Roots. Seoul Journal of Economics, 32, 23-62.
[5]
Arezki, R., Fan, R. Y., & Nguyen, H. (2019). Technology Adoption and the Middle-Income Trap: Lessons from the Middle East and East Asia. Policy Research Working Paper No. 8870, Washington DC: World Bank.
https://doi.org/10.1596/1813-9450-8870
[6]
Aviliani, A., Siregar, H., & Hasanah, H. (2014). Addressing the Middle-Income Trap: Experience of Indonesia. Asian Social Science, 10, 163.
https://doi.org/10.5539/ass.v10n7p163
[7]
Bernard, A., & Durlauf, S. (1996). Convergence in International Output. Journal of Applied Econometrics, 10, 97-108. https://doi.org/10.1002/jae.3950100202
[8]
Bukowski, M., Halesiak, A., & Petru, R. (2013). Konkurencyjna Polska 2020. Deregulacjai-Innowacyjnosc. WarszawskiInstytutStudiówEkonomicznych.
https://polskie-zaklady-bukmacherskie.pl/?fid=17
[9]
Bulman, D., Eden, M., & Nguyen, H. (2014). Transitioning from Low-Income Growth to High-Income Growth: Is There a Middle Income Trap? World Bank Policy Research Working Paper No. 7104. https://doi.org/10.1596/1813-9450-7104
[10]
Dieye, A. M. (2014). Want to Escape Africa’s Middle-Income Trap? Avoid the “Jekyll and Hyde Syndrome”. Devex.
https://www.devex.com/news/want-to-escape-africa-s-middle-income-trap-avoid- the-jekyll-and-hyde-syndrome-83764
[11]
Doner, R. F., & Schneider, B. R. (2016). The Middle-Income Trap: More Politics than Economics. World Politics, 68, 608-644. https://doi.org/10.1017/S0043887116000095
[12]
Eichengreen, B., Park, D., & Shin, K. (2012a). When Fast Growing Economies Slow Down: International Evidence and Implications for China. Asian Economic Papers, 11, 42-87. https://doi.org/10.1162/ASEP_a_00118
[13]
Eichengreen, B., Park, D., & Shin, K. (2012b). From Miracle to Maturity: The Growth of the Korean Economy. Cambridge, Mass.: Harvard University Press for the Harvard Asia Center.
[14]
Farah, N. (2016). Evaluating Growth Slowdowns: Does Middle-Income Trap Exist (pp. 9-15)? Charleston, IL: Eastern Illinois University.
[15]
Felipe, J., Abdon, A., & Kumar, U. (2012). Tracking the Middle-Income Trap: What Is It, Who Is in It, and Why? https://doi.org/10.2139/ssrn.2049330
[16]
Felipe, J., Kumar, U., & Galope, R. (2014). Middle-Income Transitions: Trap or Myth? Asian Development Bank Economics Working Paper Series, No. 421.
https://doi.org/10.2139/ssrn.2558905
[17]
Flaaen, A., Ghani, E., & Mishra, S. (2013). How to Avoid Middle-Income Traps? Evidence from Malaysia. Washington DC: World Bank. https://doi.org/10.1596/1813-9450-6427
[18]
Furuoka, F., Pui, K. L., Ezeoke, C., Jacob, R. I., & Yaya, O. S. (2019). Growth Slowdowns and Middle-Income Trap: Evidence from New Unit Root Framework. MPRA Paper 98672, University Library of Munich, Germany.
https://doi.org/10.1142/S0217590820500083
[19]
Gill, I. S., & Kharas, H. (2007). An East Asian Renaissance: Ideas for Economic Growth. Washington, DC: World Bank.
https://openknowledge.worldbank.org/handle/10986/6798
https://doi.org/10.1596/978-0-8213-6747-6
[20]
Im, F. G., & Rosenblatt, D. (2013). Middle-Income Traps: A Conceptual and Empirical Survey. Policy Research Working Paper No. 6594, Washington DC: World Bank.
https://doi.org/10.1596/1813-9450-6594
[21]
IMF (2016). Africa on the Move: Unlocking the Potential of Small Middle-Income States (pp. 3-4).
[22]
IMF (2019). 2019 Article IV Consultation Press Release, Staff Report, and Statement by the Executive Director for Zambia. Lusaka: IMF.
[23]
Ito, T. (2017). A New Financial Order in Asia: Will a RMB Bloc Emerge? Journal of International Money and Finance, 74, 232-257.
https://doi.org/10.1016/j.jimonfin.2017.02.019
[24]
Jones, C. I. (2002). Sources of U.S. Economic Growth in a World of Ideas. American Economic Review, 92, 220-239. https://doi.org/10.1257/000282802760015685
[25]
Kang, N., & Paus, E. (2020). The Political Economy of the Middle Income Trap: The Challenges of Advancing Innovation Capabilities in Latin America, Asia and Beyond. The Journal of Development Studies, 56, 651-656.
https://doi.org/10.1080/00220388.2019.1595601
[26]
Khan, R. (2019). Towards an Upper Middle-Income Economy. The Patriot.
[27]
Kharas, H., & Kohli, H. (2011). What Is the Middle-Income Trap, Why Do Countries Fall into It, and How Can It Be Avoided? Global Journal of Emerging Market Economies, 3, 281-289. https://doi.org/10.1177/097491011100300302
[28]
Kim, L. (1997). Imitation to Innovation: The Dynamics of Korea’s Technological Learning. Boston, MA: Harvard Business Press.
[29]
Konya, S., Karacor, Z., & Yardimci, P. (2018). The Middle Income Trap: An Empirical Evidence on the Turkish Economy. International Journal of Diplomacy and Economy, 4, 172-184. https://doi.org/10.1504/IJDIPE.2018.094091
[30]
Lee, J.-W. (2019). Convergence Success and the Middle-Income Trap. The Developing Economies, 58, 30-62. https://doi.org/10.1111/deve.12214
[31]
Lee, K., & Li, S. (2014). Possibility of a Middle-Income Trap in China: Assessment in Terms of the Literature on Innovation, Big Business, and Inequality. Frontiers of Economics in China, 9, 370-397.
[32]
Leven, B. (2019). Middle-Income Trap: The Case of Poland. Business and Economics Research Journal, 10, 1029-1038. https://doi.org/10.20409/berj.2019.219
[33]
Mondi, L. (2016). South Africa Can Expect Zero Growth. Its Problems Are Largely Homemade. The Conversation.
[34]
Oxley, L., & Greasley, D. (1997). Convergence in GDP Per Capita and Real Wages: Some Results for Australia and the UK. Mathematics and Computers in Simulation, 43, 429-436.
https://doi.org/10.1016/S0378-4754(97)00028-1
[35]
Paprotny, D. (2021). Convergence between Developed and Developing Countries: A Centennial Perspective. Social Indicators Research, 153, 193-225.
https://doi.org/10.1007/s11205-020-02488-4
[36]
Pritchett, L., & Summers, L. (2014). Growth Slowdowns: Middle-Income Trap vs. Regression to the Mean. VOX CEPR’s Policy Portal.
[37]
Robertson, P. E., & Ye, L. (2013). On the Existence of a Middle-Income Trap. University of Western Australia Working Paper 13/12.
[38]
Solow (1956). A Contribution to the Theory of Economic Growth. The Quarterly Journal of Economics, 70, 65-94. https://doi.org/10.2307/1884513
[39]
Steinbach, R. (2019). Growth in Low-Income Countries, Evolution, Prospects, and Policies. Policy Research Working Paper 8949. https://doi.org/10.1596/1813-9450-8949
[40]
The Economist (2011). Beware the Middle-Income Trap: China’s Roaring Growth Cannot Last Indefinitely. The Economist, 4-8.
[41]
Woo, W., Lu, M., Sachs, J., & Chen, Z. (2012). A New Economic Growth Engine for China: Escaping the Middle-Income Trap by Not Doing More of the Same. London: Imperial College Press. https://doi.org/10.1142/8598
[42]
Zhu, M. (2016). Small Middle-Income Countries in Africa Need to Rethink Their Growth Strategy. Tralac.
