Empirical Study On Middle-Income Trap In East Asia Learning Experiences From The Four Dragons

Middle-income trap has been under heated discussion these days, and the researchers have always focused on East Asia, where economic miracle used to take place. Middle-income trap is widely accepted as a problem of economic growth slowdown because of lack of dynamism. This thesis summarizes some significant and cutting-edge literature on middle-income trap, trying to provide a comprehensive review on the topic.The analysis on middle-income trap is divided into two parts and basically the thesis narrows its concentration on endogenous dynamics for economies to escape from middle-income trap. The first part is the theoretical analysis. In this part, unique economic development patterns of East Asia is discussed and on this basis, theories on TFP as well as human capital are further explained as the most important endogenous dynamics to fuel economic growth without getting trapped in economic stagnation. The second part is the empirical analysis. Concentrating on East Asia, this thesis picks 7 countries and economies for case studies. By means of learning the successful experience of the Four Dragons, which also known as NIEs (newly industrializing economy), this thesis examines the determinants of both the income level as well as income growth rate, covering education, innovation, economic structure, and some other macroeconomic facts.The empirical results provide some implications from the statistical perspective. They indicate that the development of tertiary education does matter since it cultivates skilled and professional talents for different economic sectors. Also investment in R&D is indispensable because the 21st century is an era of the knowledge economy. What is more, economic structure is rather important considering that the service sector is the one with the highest value-added. Last but not the least, it is necessary to have a stable macroeconomic environment, which acts as the cornerstone of all growth.Based on the theoretical explanations as well empirical results, this thesis gives some policy recommendations. In order to avoid middle-income trap, investment in education and R&D is never too less. Innovation and human capital input are keys for economies to realize continuous growth.