The “middle income trap” is defined as the situation in which an economy reaches a certain level of per capita income and then cannot increase this level and remains in the same situation. The report emphasizes the obstacles in front of developing countries' goals of joining the group of high-income countries and offers suggestions on how these countries can get out of the “middle income trap”. The study, which is based on the experiences of countries over the past half-century, generally assesses that as countries get richer, they get caught in the middle-income trap.
At the end of 2023, 108 countries with a GDP per capita between $1,136 and $13,845 are classified as middle-income. These countries cover 75% of the global population, more than 40% of global GDP and more than 60% of carbon emissions. In this context, it is emphasized that prioritizing the work to be carried out in middle-income countries is of critical importance in increasing global economic prosperity. To avoid this trap, it is emphasized that it is important not to rely solely on investment over many years, but also not to innovate too early. It argues that countries need to adopt a sequential and increasingly complex policy mix, depending on their stage of development, in order to become high-income countries. It is pointed out that countries can avoid the trap by implementing practices within the stages called 1i (investment), 2i (investment + infusion) and 3i (investment + infusion + innovation).
Accordingly, low-income countries can focus only on policies to increase investment in stage 1i. However, once they reach lower-middle income status, they need to expand the policy mix to stage 2i, the investment and infusion phase, which consists of adopting technologies from abroad and diffusing them throughout the economy. Upper-middle-income countries should move towards the 3i stage, where they balance investment, infusion and innovation. In the innovation phase, countries should now move towards an approach where they not only borrow ideas from the global frontiers of technology, but also push the boundaries.
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