The relationship between middle-income trap and economic complexity level: An ivestigation on Turkey

ABSTRACT Summary Middle İncome Trap case states that the economy which has been experiencing rapid growth has lost its growth momentum after reaching the middle income level and has failed to pass to the group of high income countries staying at this level for many years as a result of per capita income decelerating at cebrin stage. As the production structure needs to undergo a transformation from low value added sectors to higher value-added sectors in the development process of countries, structural transformation mainly refers to the shift of inputs used in the economy from low productivity agricultural sectors to non agricultural sectors. It is seen that the structural transformation of the products produced and exported by countries in time has a great importance fort he sustainable growth of the economy. As a matter of fact, Nowadays the important determinant of the welfare levels of countries is productive production structure that includes knowledge and skill and long term income increases of countries depend on the degree of sophistication of the products produced and exported rather than the volume increase in production and exports. The concept of economic complexity is a significant phenomenon that is used to express the sap his tication of the economic structures and it measures the information density of the economy and demonstrates the ability to determine the growth of in the future. According to Atlas Management of The World Bank ,which is accepted the basic one to determine Common Customs Tariff, after rose to the category of the countries with low-middle income in 1955; Turkey could pass the category of high-income group (the category of the countries with low-middle income) since 2005 by remaining in this stage for 50 years. According to the classification of The World Bank in 2017, Turkey is in high-middle income level with its per capita income of $ 10.940. In this context as the first aim of the study, on the axis of various indicators which were obtained for the term 1995-2017, it is evaluated the position of Turkey in MIT by doing comperative case assessment with the selected countries in the high-middle income group which also consist of Turkey (Turkey, Malaysia, Thailand) and the selected countries in the high-income group (South Korea, Japan, Singapore). In fact, another aim of the study is to evaluate the structural transformation in some selected countries which rose to high-income group in a short time within the change in economic complexity, and to detect the current state for Turkey in terms of the indicator of economic complexity. Accordingly, ADF unit root test is applied according to the economic complexity index data for the period 1990-2017 to put forth if the selected countries in the high-middle income group which consist of Turkey (Turkey, Malaysia, Thailand) converge on the average of both the selected countries in the high-income group (South Korea, Japan, Singapore) and individually to each high-income country or not. After comperative analysis, it has been seen that the most important difference between high-middle income countries and high-income countries in terms of various indicators, the economic indicators in high-income countries are more stable and show continuity compared to the high-middle income countries. Turkey generally drop behind according to the performance of both the high-middle income countries and high-income countries. According to the test results Turkey, in terms of structural transformation within economical complexity level, it includes unit root that means, it isn't stable. So Turkey isn't among the countries with high income. It is same in Thailand which is at the same category with Turkey. There isn't a meaningful result at group average statistically. Although being at the same category with Turkey, Malaysia is different. Malaysia, takes place with in the countries with high income as Japan, South Korea, Singapore. It is also near economical complexity level of Singapore. Based on these results, that can be mentioned, Malaysia has a better performance of structural transformation than Turkey and Thailand in Mıddle Income Trap. Keywords: Mıddle Income Trap, Structural Transformation, Sophisticated Product, Economic Complexity, Convergence.