Learning from China's Rise to Escape the Middle-Income Trap : A New Structural Economics Approach to Latin America
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World Bank, Washington, DC
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This paper discusses the causes of the
middle-income trap in Latin America and the Caribbean,
identifies the challenges and opportunities for Latin
America that come from China's rise, and draws lessons
from New Structural Economics and the Growth Identification
and Facilitation Framework to help Latin America escape the
middle-income trap. Countries in Latin America and the
Caribbean are caught in a middle-income trap due to their
inability to structurally upgrade from low value-added to
high value-added products. Governments in Latin America and
the Caribbean should intervene in industries in which they
have a comparative advantage, calibrating supporting
policies in close collaboration with the private sector
through public-private sector alliances. Through continuous
structural upgrading in sectors intensive in factors such as
natural resources, scientific knowledge, and unskilled
labor, the region could achieve dynamic growth. This would
require investments in education, research and development,
and physical infrastructure. Therefore, industrial upgrading
and diversification would be essential to avoid further
de-industrialization arising from the competitive pressures
of the rise of China, broaden the base for economic growth,
and create the basis for further sustained reduction in
unemployment, poverty and income inequality. Failure to do
so would lead to a loss of competitiveness and risks of
further de-industrialization.
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ACCOUNTING, ADVANCED COUNTRIES, ADVANCED COUNTRY, ADVANCED ECONOMIES, AFFILIATES, AGRICULTURE, BANK OF KOREA, BANKING CRISES, BANKING SUPERVISION, BANKING SYSTEM, BANKS, BASE YEAR, BENCHMARKS, BINDING CONSTRAINTS, BUDGET DEFICITS, BUSINESS CYCLES, CAPITAL ACCUMULATION, CAPITAL FLOWS, CAPITAL INFLOWS, CAPITAL INTENSITY, COMMERCIAL BANK, COMMODITIES, COMMODITY, COMMODITY EXPORTS, COMMODITY PRICES, COMPARATIVE ADVANTAGE, COMPETITIVE MARKET, COMPETITIVENESS, CONSUMERS, CONTINGENT LIABILITIES, CREDIT POLICIES, CURRENCY, DEBT, DEBT CRISES, DEBT CRISIS, DEMOGRAPHIC, DEMOGRAPHIC CHANGES, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DEVELOPING ECONOMIES, DEVELOPMENT BANKS, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DEVELOPMENT STRATEGY, DIMINISHING RETURNS, DISPOSABLE INCOME, DIVIDENDS, DYNAMIC ECONOMIES, ECONOMETRIC ANALYSIS, ECONOMIC CONDITIONS, ECONOMIC DEVELOPMENT, ECONOMIC EFFICIENCY, ECONOMIC GROWTH, ECONOMIC HISTORY, ECONOMIC OUTLOOK, ECONOMIC PERFORMANCE, ECONOMIC POWERHOUSE, ECONOMIC REFORM, ECONOMIC REFORMS, ECONOMIC STRUCTURE, ECONOMIES OF SCALE, EMERGING ECONOMIES, EMERGING MARKET, EMERGING MARKET ECONOMIES, EMERGING MARKETS, ENERGY RESOURCES, EXCHANGE RATE, EXCHANGE RATE REGIMES, EXCHANGE RATES, EXPORT BASE, EXPORT MARKETS, EXPORTS, EXPOSURE, EXTERNALITY, FACTORS OF PRODUCTION, FINANCIAL CRISES, FINANCIAL CRISIS, FINANCIAL INSTITUTION, FINANCIAL INSTITUTIONS, FINANCIAL MARKETS, FINANCIAL SECTOR, FINANCIAL SECTORS, FINANCIAL STABILITY, FINANCIAL SUPPORT, FINANCIAL SYSTEM, FINANCIAL SYSTEMS, FISCAL CONSOLIDATION, FISCAL DEFICIT, FLEXIBLE EXCHANGE RATE, FORECASTS, FOREIGN DIRECT INVESTMENT, FOREIGN EXCHANGE, FOREIGN FIRMS, FOREIGN INVESTMENT, FOREIGN TRADE, FUTURE GROWTH, GDP, GDP DEFLATOR, GDP PER CAPITA, GLOBAL ECONOMIC LANDSCAPE, GLOBAL ECONOMY, GLOBAL EXPORTS, GLOBAL MARKET, GLOBAL OUTPUT, GLOBAL RISK, GLOBALIZATION, GNP, GOVERNMENT DEBT, GOVERNMENT INTERVENTIONS, GROSS DOMESTIC PRODUCT, GROWTH OF MULTINATIONAL, GROWTH POTENTIAL, GROWTH RATE, GROWTH RATES, GROWTH THEORY, HUMAN CAPITAL, INCOME, INCOME DISTRIBUTION, INCOME GROWTH, INCOME INEQUALITY, INDIVIDUAL FIRMS, INDUSTRIAL COUNTRIES, INDUSTRIALIZATION, INFLATION, INFLATION TARGETING, INFLATIONARY FINANCING, INFORMATION TECHNOLOGY, INFRASTRUCTURE INVESTMENT, INFRASTRUCTURE REQUIREMENTS, INTANGIBLE, INTEREST RATES, INTERNATIONAL BANK, INTERNATIONAL TRADE, INVESTMENT CLIMATE, INVESTMENT DECISION, INVESTMENT POLICY, JOINT VENTURES, LABOR COSTS, LAWS, LEGISLATION, LIBERALIZATION, LIVING STANDARDS, LOW-INCOME COUNTRIES, LOW-INCOME COUNTRY, MACROECONOMIC STABILIZATION, MACROECONOMIC VULNERABILITIES, MANUFACTURING INDUSTRIES, MARGINAL COST, MARKET ACCESS, MARKET FAILURES, MARKET PARTICIPANTS, MARKET SHARE, MARKET SHARES, MIDDLE-INCOME COUNTRIES, MIDDLE-INCOME COUNTRY, MIGRATION, MONETARY POLICY, MONOPOLY, MULTINATIONAL CORPORATIONS, NATURAL RESOURCE, NATURAL RESOURCES, NEOCLASSICAL MODELS, NET EXPORTS, NEW MARKETS, NONPERFORMING LOANS, OUTPUT, OUTPUTS, PER CAPITA INCOME, PER CAPITA INCOMES, POLITICAL POWER, POWER PARITY, PRIVATE CAPITAL, PRIVATE CAPITAL FLOWS, PRIVATE INVESTMENT, PRIVATIZATION, PRODUCT MARKETS, PRODUCTIVITY, PRODUCTIVITY GROWTH, PROTECTIONISM, PUBLIC DEBT, PUBLIC ENTERPRISES, PURCHASING POWER, RAPID GROWTH, RATE OF RETURN, REAL EXCHANGE RATES, RESOURCE ALLOCATION, RETURN ON INVESTMENT, SAVINGS, SAVINGS RATES, SCARCE CAPITAL, SEIGNIORAGE, SOCIAL CAPITAL, SOCIAL PROTECTION, STABILIZATION POLICIES, STATE ENTERPRISES, STRUCTURAL CHANGE, SURPLUS LABOR, TARIFF BARRIERS, TAX, TAX COLLECTION, TAX SYSTEM, TELECOMMUNICATIONS, TRANSACTION, TRANSACTION COSTS, TRANSPARENCY, TRANSPORT, UNEMPLOYMENT, UNFAIR COMPETITION, VALUE ADDED, WAGES, WEALTH, WORLD DEVELOPMENT INDICATORS, WORLD ECONOMIES, WORLD ECONOMY, WORLD MARKET, WORLD MARKETS, WORLD TRADE, WORLD TRADE ORGANIZATION