Determinants of middle income trap and an analysis on emerging economies

The concept of middle income trap (MIT) generally refers to countries that are growing rapidly, reaching the middle income level but then do not reach high income levels. One of the basic economic problems of middle income countries that achieving successful growth performance from the low income group to the middle income group is inability to high income groups. The aim of this study is to analyze the factors determining the MIT for the 1996-2015 period of the selected 16 countries in the upper-middle income group. Study is consist of three base matter, first of all, we present theoritical and empirical literature; then the factors determining the MIT are analyzed by panel cointegration and causality tests and the analysis findings are interpreted econometrically. In this analysis, second-generation panel unit root tests are used in order to take note of the cross-sectional dependence (CSD) between the countries in question. The determinants of MIT in econometric analysis are the factors that determine the GDP per capita (Y) and MIT as dependent variables which R&D expenditures (ARGE), openness (DAO), internet use rate (IKO), education expenditures (EH),labor productivity (IV), number of published scientific papers (BMK), inflation rate (ENF) and unemployment rate (IO) are used. In the cointegration analysis results, the cointegration relationship between the dependent variable and 8 independent variables were determined. With results of the panel causality analysis, one-way causality relation is determined from Y to DAO and ARGE variables, and IKO, IV and BMK variables Y. Two-way causality findings are found between Y and IO and EH variables. There is no causality relation between Y and ENF variable. Within the framework of the empirical findings obtained in the study, policy proposals for the countries that in middle income group in the are presented to avoid MIT.