The effect of saving gap and R&D expenditures on middle incometrap: Selected OECD countries

The middle income concept begun to be used in the early 2000s describes the countries that have not been able to accomplish the sustainable economic growth and have been stuck in the level of income per capita for many years. The concept first introduced by Gill and Kaharas (2007) who are World Bank employees defines the countries that are caught in the middle income trap as the countries that can not compete with the underdeveloped countries in the low-paid standard manufacturing industry products while the countries having difficulty in converging with the ones in the upper income group developing innovatively. In this thesis, it has been discussed that the reasons of middle income trap, the countries that have managed to get out of the trap and the reasons for their successes, their R & D expenditures and the influences of domestic saving rates on the recovery from middle income trap. The variables in question have been analysed by applying the dynamic CCEGM model in the new generation panel data models applied in the event of that gradient index is heterogeneous and takes cross sectional dependence into consideration. As a result of the panel data formed by the data of 1995-2015 of 20 countries that are OECD members, positive results of variables have been obtained as expected. When the values of coefficient obtained according to the model that can give separate results for each country have been interpreted within the concept of Turkey index, it has been concluded that increasing of domestic saving rates is the most efficient variable to recover from middle income trap. Keywords: Middle Income Trap, R & D, Savings, CCEGM, OECD, Turkey