World Bank Study Reveals Middle-Income Trap Affecting 100+ Developing Countries
More than 100 developing countries, including economic giants like China, India, Brazil, and South Africa, are struggling to become high-income economies, a phenomenon known as the "middle-income trap."
This phenomenon typically occurs when a country's per capita income reaches around $8,000, or 10% of that of the United States. Currently, 108 countries, representing 75% of the global population and over 40% of global GDP, are facing this challenge, grappling with issues such as demographic aging, protectionism, and energy transition.
The report proposes the "3i strategy" as a solution. This approach, structured into three phases, aims to guide countries based on their development stage. For low-income economies, the focus is on investment. Once a certain development threshold is reached, these countries should introduce foreign technologies into their economy, a process called "infusion."
Finally, for countries that have reached a higher middle-income level, the key to success lies in innovation, in addition to the first two steps. This phase involves not only adopting global best practices but also creating local innovations that push technological boundaries.
The example of South Korea is often cited to illustrate this strategy. In 1960, with a per capita income of only $1,200, the country began by encouraging public and private investments. Then, in the 1970s, South Korea adopted foreign technologies and modernized its production methods. Today, with a per capita income of $33,000 in 2023, South Korea is a global innovation leader, thanks to companies like Samsung.
Other countries have also successfully escaped the middle-income trap by adopting similar strategies. Poland, for instance, has focused on increasing productivity by injecting European technologies, while Chile has stimulated national innovation by adapting foreign technologies to its local conditions, such as salmon farming.
