Publication: Learning from China's Rise to Escape the Middle-Income Trap : A New Structural Economics Approach to Latin America
Date
2012-08
ISSN
Published
2012-08
Author(s)
Abstract
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.
Citation
“Lin, Justin Yifu; Treichel, Volker. 2012. Learning from China's Rise to Escape the Middle-Income Trap : A New Structural Economics Approach to Latin America. Policy Research Working Paper;6165. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/67c1e571-088e-575b-b394-443d5eb81c08 License: CC BY 3.0 IGO.”
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