Middle Income Trap
Version 1.0.0 · Updated 2026-07-30
CORE DEFINITION
It refers to a situation where a country, after reaching a middle-income level, loses its low-end manufacturing advantage due to rising wage costs, but lacks competitiveness in high-end industries, leading to economic stagnation and difficulty in entering the ranks of high-income countries.
SCAFFOLDING EFFECT
Reduce cognitive load
Development stage transition. It explains why many countries can escape poverty but struggle to become wealthy. In industrial upgrading planning, it reminds that it is necessary to break through development bottlenecks through technological innovation, human capital improvement, and institutional improvement to avoid long-term stagnation.
Anchor fast decisions
After a country's development reaches a middle-income level, its low-cost labor advantage is replaced by lower-income countries, while its technological innovation and high-end industries are not as advanced as developed countries, falling into a growth gap of "neither here nor there." The mechanism is: comparative advantage fails to upgrade with factor prices, total factor productivity stagnates, leading to long-term stagnation.
MINIMUM ACTION
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Source support: Explicit
- en.wikipedia.orghttps://en.wikipedia.org/wiki/Middle_income_trapverified
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