Escaping the middle-income trap

An eminent economist once observed that “(t)he dramatic mod-ernization of the Asian economies ranks alongside the Renaissance and the Industrial Revolution as one of the most important develop-ments in economic history. ” The economist in question was —mem-bers of this audience will have guessed—Larry Summers. He was referring to the rapid economic growth of the late 20th and early 21st centuries and to Asian economies other than Japan. In these remarks I want to reflect not on the familiar if still contested issue of what explains this “Asian Miracle ” but on whether it can con-tinue at anything approaching the same pace (although the two issues are obviously connected). The question is whether the fast-growing economies of East Asia are now poised to slow down. It is whether they will fall prey to what is referred to as the “middle-income trap.” History helps to shed light on this question. In joint work with Donghyun Park of the Asian Development Bank and Kwanho Shin