Publication: Hindering or enabling? The role of states in MIC to HIC transitions in ECA
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2025-01-03
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2025-01-03
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While the state played a strong role in South Korea’s development, the state itself underwent a push for reforms in terms of promoting effective as well as impartial institutions. At the outset, institutional quality in South Korea was only marginally better than middle income countries (MIC) averages. This was followed by major improvements during the country’s upper middle-income stage. A rapid shift towards near-Organization for Economic Co-operation and Development (OECD) institutional quality occurred between 1980 and 2000, as South Korea transitioned from MIC to high-income status - when government rapidly brought corruption levels down and decisively moved to improve the public administration. An increasingly capable public sector leveraged foreign aid to support industrialists in adopting modern technologies and reinvesting profits. While risks of capture are inherent to industrial policy - and can turn such policies into a fiscal burden fueling rent-seeking - continuous public sector improvements and high-level commitment to success allowed maintaining a focus on performance rather than incumbency protection. This note focuses on the role of the state in the pursuit of middle- to high-income transitions in Europe and Central Asia (ECA). ECA MIC to high income countries (HIC) transitions account for almost one third of the countries (11 out of 34) that newly achieved high-income status since 1990 (WDR 2024) - suggesting that states in ECA converges must have gotten something right. This note explores differences in the role of the state across these groups, while also relating these back to the experience of South Korea and Finland.
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“World Bank. 2025. Hindering or enabling? The role of states in MIC to HIC transitions in ECA. © World Bank. http://hdl.handle.net/10986/42594 License: CC BY-NC 3.0 IGO.”
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