ARE FRAGILE FIVE COUNTRIES IN THE MIDDLE-INCOME TRAP?: AN EMPIRICAL INVESTIGATION BASED ON INCOME CONVERGENCE AND PANEL DATA ANALYSIS

Year 2021, , 451 - 477, 31.07.2021

Furkan Yıldız , Yüksel Bayraktar

https://doi.org/10.14783/maruoneri.927490

Cited By: 4

Abstract

The growth performances of countries demonstrate that very few countries reach the higher income group from middle income, in terms of per capita income. The rigidity of the transition between income groups has led to the debate of the middle-income trap (MIT) concept gaining importance. The main goal of current study is to analyze the existence of MIT for the Fragile Five countries (Brazil, India, Indonesia, South Africa, Turkey) and provide some policy recommendations for moving away from MIT. In the current study, two different test procedures, consisting of the income convergence test procedure, and the panel data analysis applied to determine the factors affecting the economic growth of the countries examined, were applied. The income convergence test reveals the only country in MIT is Brazil. On the other hand the results demonstrate a positive and statistically significant relationship between the GDPPC and tertiary school enrollment, real effective exchange rate, gross capital investments, industry value added, agriculture value added and terms of trade and for the Fragile Five. Therefore, policies that support these variables are important to move away from MIT.

Keywords

Middle-Income Trap, Fragile Five, Panel Data Analysis, Income Convergence, Turkey

KIRILGAN BEŞLİ ÜLKELERİ ORTA-GELİR TUZAĞINDA MI?: GELİR YAKINSAMASI VE PANEL VERİ ANALİZİNE DAYALI AMPİRİK BİR İNCELEME

Abstract

Büyüme performansları, çok az ülkenin kişi başına gelir açısından orta gelir grubundan yüksek gelir grubuna erişebildiğini ortaya koymaktadır. Gelir grupları arasındaki geçişin katı olması, Orta-Gelir Tuzağı (OGT) bağlamındaki tartışmaların önem kazanmasına yol açmıştır. Bu çalışmanın amacı makro ekonomik özellikleri benzerlik gösteren Brezilya, Endonezya, Güney Afrika, Hindistan ve Türkiye’den oluşan Kırılgan Beşli için OGT’nin varlığını test etmek ve OGT’den uzaklaşılması için politika önerileri sunmaktır. Bu amaca paralel olarak çalışmada 1960-2015 dönemi için gelir yakınsaması testi ve 1960-2012 dönemi için Kırılgan Beşli için iktisadi büyümenin belirleyicilerini açıklamak için uygulanan panel veri analizinden oluşan iki farklı test prosedürü uygulanmıştır. Gelir yakınsama testi sadece Brezilya’nın orta-gelir tuzağında olduğunu; panel veri sonuçları ise Kırılgan Beşli için GSYİHKB ile üçüncül okullaşma oranı, reel efektif döviz kuru, brüt sermaye yatırımları, katma değerli sanayi üretimi, dış ticaret haddi ve katma değerli tarımsal üretim arasında aynı yönlü ve istatistiki açıdan anlamlı bir ilişki olduğunu göstermektedir. Dolayısıyla söz konusu bağımsız değişkenleri destekleyici politikalar, OGT’den uzaklaşmak için önemlidir.

Keywords

Orta-Gelir Tuzağı, Kırılgan Beşli, Panel Veri Analizi, Gelir Yakınsaması, Türkiye

References

• Acemoglu, D., & Johnson, S. (2007). Disease and development: The effect of life expectancy on economic growth. Journal of Political Economy, 115(6), 925-985.
• Aggarwal, A., & Kumar, N. (2015). Structural change, industrialization, and poverty reduction. Naudé, W., Szirmai, A., & Haraguchi, N. (Eds.). Structural change and industrial development in the BRICS. (pp.199- 243). Oxford University Press.
• Aiyar, M. S., Duval, M. R. A., Puy, M. D., Wu, M. Y., & Zhang, M. L. (2013). Growth slowdowns and the middleincome trap (No. 13-71). International IM Working Paper, (13/71).
• Akpınar, A. T. (2017, 21 Mart). Türkiye’de ekonomik krizler 1986, 1988-1989 ve 1991 krizleri. https://sinestezi. wordpress.com/2009/03/18/turkiye-de-ekonomik-krizler-1986-1988-1989-ve-1991-krizleri/ adresinden alındı.
• Baer, W. (2001). The Brazilian economy: Growth and development, 5th Edition, Westport US: Praeger.
• Barro, R., & Sala-i-Martin, X. (2004). Economic growth. London: MIT Press.
• Bonelli, R. (2005). Economic growth and productivity change in Brazil. https://citeseerx.ist.psu.edu/viewdoc/ download?doi=10.1.1.475.7940&rep=rep1&type=pdf adresinden alındı.
• Bozkurt, E., Bedir, S., Özdemir, D., & Çakmak, E. (2014). Orta gelir tuzağı ve Türkiye örneği. Maliye Dergisi, 167, 22-39.
• Bozkurt, E., Sevinç, H., & Çakmak, E. (2016). Orta gelir tuzağı: Üst orta gelirli ülkeler üzerine panel veri analizi. Ege Academic Review, 16(2), 379-394.
• Bruegel Datasets. (2017, 8 Mart). Real effective exchange rates for 178 countries: A new database. https://www. bruegel.org/publications/datasets/real-effective-exchange-rates-for-178-countries-a-new-database/ adresinden alındı.
• Cervellati, M., & Sunde, U. (2011). Life expectancy and economic growth: The role of the demographic transition. Journal of Economic Growth, 16(2), 99-133.
• Chen, C., & Dai, L. (2014). The middle income trap, branching deregulation, and political influence. Princeton University.
• Cherif, R., & Hasanov, F. (2019). The Leap of the Tiger: Escaping the Middle‐income Trap to the Technological Frontier. Global Policy, 10(4), 497-511.
• Chinn, M., D., & Ito, H. (2006). What matters for financial development? Capital controls, institutions and interactions. Journal of Development Economics, 81(1), 163-192.
• CIA World Factbook. (2017, 21 Mart). Indonesia Economy http://www.allcountries.org/wfb2007/indonesia/ indonesia_economy.html, adresinden alındı.
• Coppedge, M., Gerring, J., Knutsen C., H., Lindberg, I., S., Teorell, J., Alizada, N., Altman, D., Bernhard, M., Cornell, A., Fish, S., M., Gastaldi, L., Gjerløw, H., Glynn, A., Hicken, A., Hindle, G., Ilchenko, N., Krusell, J., Luhrmann, A., Maerz, S., f., Marquardt, K., L.,… Ziblatt D. (2016). V-Dem [Country-Year/ Country-Date] Dataset v6.2. Varieties of Democracy (V-Dem) Project.
• Das, P. (2007). Economic growth and structural break in India: Testing unit root hypothesis. The Journal of Income and Wealth, 29(2), 29-43.
• De Meulemeester, J. L., & Rochat, D. (1995). A causality analysis of the link between higher education and economic development. Economics of Education Review, 14(4), 351-361.
• Di Nino, V., Eichengreen, B., & Sbracia, M. (2011). Real exchange rates, trade, and growth: Italy 1861-2011. Bank of Italy Economic History Working Paper, (10).
• Egawa, A. (2013). Will Income Inequality Cause a Middle-income Trap in Asia? Bruegel Working Paper, (2013/06).
• Eichengreen, B., Park, D., & Shin, K. (2012). When fast-growing economies slow down: International evidence and implications for China. Asian Economic Papers, 11(1), 42-87.
• Eichengreen, B., Park, D., & Shin, K. (2013). Growth slowdowns redux: New evidence on the middle-income trap (No. w18673). National Bureau of Economic Research.
• Felipe, J., Abdon, A., & Kumar, U. (2012). Tracking the middle-income trap: What is it, who is in it, and why?. Levy Economics Institute, Working Paper, (715).
• Gill, I., & Kharas, H. (2007). An East Asian renaissance: Ideas for economic growth. The World Bank.
• Glawe, L., & Wagner, H. (2020). China in the middle-income trap?. China Economic Review, 60, 1-26.
• Gluzmann, P., Levy-Yeyati E. & Sturzenegger, F. (2012). Exchange rate undervaluation and economic growth: Díaz Alejandro (1965) revisited. Economic Letters, 117, 666-672.
• Gürsel, S., & Soybilgen, B. (2013). Türkiye Orta Gelir Tuzağının Eşiğinde. Bahçeşehir Üniversitesi Ekonomik ve Toplumsal Araştırmalar Merkezi Araştırma Notu, (13/154).
• Han, X., & Wei, S. J. (2017). Re-examining the middle-income trap hypothesis (MITH): What to reject and what to revive?. Journal of International Money and Finance, 73, 41-61.
• Hansen, C. W., & Lønstrup, L. (2015). The rise in life expectancy and economic growth in the 20th century. The Economic Journal, 125(584), 838-852.
• IMF. (2016, 21 Şubat). Consumer price index. https://data.imf.org/?sk=4FFB52B2-3653-409A-B471- D47B46D904B5 adresinden alındı.
• Industrial Development Corporation. (2013). South African economy: An overview of key trends since 1994.
• Islam, N. (2013). Beyond the middle income trap: What kind of high income country can China become. ICSEAD Working Paper, (2013-20).
• Jayachandran, S., & Lleras-Muney, A. (2009). Life expectancy and human capital investments: Evidence from maternal mortality declines. The Quarterly Journal of Economics, 124(1), 349-397.
• Jimenez, E., Nguyen, V., & Patrinos, H. A. (2012). Stuck in the middle? Human capital development and economic growth in Malaysia and Thailand. World Bank Policy Research, Working Paper, (6283).
• Kharas, H., & Kohli, H. (2011). What is the middle income trap, why do countries fall into it, and how can it be avoided?. Global Journal of Emerging Market Economies, 3(3), 281-289.
• Lin, T. C. (2004). The role of higher education in economic development: An empirical study of Taiwan case. Journal of Asian Economics, 15(2), 355-371.
• Lorentzen, P., McMillan, J., & Wacziarg, R. (2008). Death and development. Journal of Economic Growth, 13(2), 81-124.
• Lumsdaine, R. L., & Papell, D. H. (1997). Multiple trend breaks and the unit-root hypothesis. Review of Economics and Statistics, 79(2), 212-218.
• Ohno, K. (2009). Avoiding the middle-income trap: renovating industrial policy formulation in Vietnam. ASEAN Economic Bulletin, 25-43.
• Park, C. Y., & Mercado Jr, R. V. (2020). Economic Convergence, Capital Accumulation, and Income Traps: Empirical Evidence. Review of Income and Wealth, 66(1), 26-58.
• Paus, E. (2012). Confronting the middle income trap: Insights from small latecomers. Studies in Comparative İnternational Development, 47(2), 115-138.
• Robertson, P., & Ye, L. (2013). On the existence of a middle income trap (No. 13-12). The University of Western Australia, Department of Economics.
• Rodrik, D. (2008). The real exchange rate and economic growth. Brookings papers on economic activity, 2008(2), 365-412.
• Romm, A. T. (2002). The relationship between savings and growth in South Africa: An empirical study (Yayınlanmamış doktora tezi). University of the Witwatersrand, Johannesburg.
• Schultz, T. P. (2004). Evidence of returns to schooling in Africa from household surveys: Monitoring and restructuring the market for education. Journal of African Economies, 13(2), 95-148.
• Tiftikçigil, B. Y., Güriş, B., & Yaşgül, Y. S. (2018). Does middle income trap exist?: Evidence from Emerging Economies: E7 Countries for 1969-2015. Revista Galega de Economia, 27(1), 145-158.
• Topal, M. H. (2020). The Middle Income Trap: Theory and Empirical Evidence. Boğaziçi Journal, 34(1), 51-75.
• Ursavas, U., & Saribas, H. (2020). Middle-income trap and factors affecting the risk of growth slowdown in upper-middle-income countries. Economics and Business Letters, 9(4), 350-360.
• Van Tho, T. (2013). The middle-income trap: Issues for members of the Association of Southeast Asian Nations (No. 421). ADBI Working Paper.
• Vivarelli, M. (2014). Structural Change and Innovation as Exit Strategies from the Middle Income Trap (No. 8148). IZA Discussion Papers.
• Woo, W. T. (2012). China meets the middle-income trap: The large potholes in the road to catching-up. Journal of Chinese Economic and Business Studies, 10(4), 313-336.
• World Bank. (2016, 22 Ocak). World development indicators. http://data.worldbank.org/about/country-andlending-groups#Low_income. adresinden alındı.
• World Bank. (2017, 18 Şubat). World development indicators. http://data.worldbank.org/data-catalog/worlddevelopment-indicators adresinden alındı.
• Worldwide Inflation Data. (2017, 21 Şubat). Inflation Indonesia. http://www.inflation.eu/inflation-rates/ indonesia/inflation-indonesia.aspx adresinden alındı.
• Wu, Y. (2014). Productivity, economic growth and the middle income trap: Implications for China. Frontiers of Economics in China, 9(3), 460-483.
• Ye, L., & Robertson, P. E. (2016). On the existence of a middle‐income trap. Economic Record, 92(297), 173-189.
• Yeldan, E., Taşçı, K., Voyvoda, E., & Özsan, M. E. (2012). Orta gelir tuzağından çıkış: Hangi Türkiye? Cilt 1: Makro/Bölgesel/Sektörel Analiz. TÜRKONFED, İstanbul.
• Yeldan, E., Taşçı, K., Voyvoda, E., & Özsan, M. E. (2013). Orta gelir tuzağından çıkış: Hangi Türkiye? Cilt 2: Bölgesel Kalkınma ve İkili Tuzaktan Çıkış Stratejileri. TÜRKONFED, İstanbul.
• Yıldız, F. (2017). Orta gelir tuzağı nedenleri ve sonuçları: Kırılgan beşli ülkeleri deneyimi (Yayımlanmamış doktora tezi). İstanbul Üniversitesi, İstanbul.
• Yılmaz, G. (2015). Turkish middle income trap and less skilled human capital. İktisat İşletme ve Finans, 30(346), 9-36.
• Zivot, E., & Andrews, D. W. K. (2002). Further evidence on the great crash, the oil-price shock, and the unit-root hypothesis. Journal of Business & Economic Statistics, 20(1), 25-44.