Economic Change and Restructuring

, Volume 49, Issue 2–3, pp 159–193 | Cite as

The middle income trap: a way out based on technological and structural change

Article

Abstract

This article is intended to provide an updated discussion on a series of issues that the relevant literature suggests to be crucial in dealing with the challenges a middle income country may encounter in its attempts to further catch up to a higher income status. In particular, the conventional economic wisdom—ranging from the Lewis-Kuznets model to the endogenous growth approach—will be contrasted with the Schumpeterian and evolutionary views pointing to the role of capabilities and knowledge, considered as key inputs to foster economic growth. Then, attention will be turned to structural change and innovation, trying to map—using the taxonomies put forward by the innovation literature—the concrete ways through which a middle income country can engage in a technological catching-up, having in mind that developing countries are deeply involved in globalized markets where domestic innovation has to be complemented by the role played by international technological transfer. Among the ways that a middle income country can foster domestic innovation and structural change in terms of sectoral diversification and product differentiation, a recent stream of literature underscores the potentials of local innovative entrepreneurship, which will also be discussed bridging entrepreneurial studies with the development literature. Finally, the possible consequences of catching up in terms of jobs and skills will be discussed.

Keywords

Catching-up Structural change Globalization Capabilities Innovation Entrepreneurship 

JEL Classification

O14 O33 

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Copyright information

© Springer Science+Business Media New York 2015

Authors and Affiliations

  1. 1.Istituto di Politica EconomicaUniversità Cattolica del Sacro CuoreMilanoItaly
  2. 2.SPRUUniversity of SussexBrightonUK
  3. 3.IZABonnGermany

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