Middle-income traps: Experiences of Asian countries and lessons for Vietnam

Hoang Xuan Vinh; Luu Huu Van; Nguyen The Vinh; Nguyen Thanh Thao; Nguyen Thi Phuong Thao; Le Thi Huong Giang; Do Thanh Nga

doi:10.31893/multirev.2024100

Keywords:

Middle-Income Trap

Asian Countries

Vietnam

Abstract

Avoiding middle-income traps is one of the critical tasks for developing countries worldwide. Based on an analysis of policies that have contributed to Japan and South Korea achieving high economic development, this study proposes solutions to help Vietnam avoid falling into the middle-income trap. The results of the analysis of the experiences of Japan and South Korea indicate that to escape the middle-income trap, developing countries need to focus on investing in education and training, promoting innovation and entrepreneurship, investing in infrastructure, enhancing international trade, boosting foreign investment, improving competitiveness in the global market, and maintaining macroeconomic stability. Building on the analysis of the economic development situation in Vietnam from 2013 to 2023, this study puts forth solutions to assist developing countries, in general, and Vietnam, in particular, in avoiding middle-income traps.
References
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15. Findlay, C., & Vo Tri Thanh. (2015). Vietnam's Garment and Textile Industry: Opportunities and Challenges in Global Value Chains. Asian Economic Policy Review, 10(2), 298-315.
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37. Ranis, G., & Stewart, F. (1993). Japan's Postwar Economic Recovery: Lessons for Developing Countries. World Development, 21(9), 1459-1473.
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41. Stern, R. M., & Tyler, W. R. (1979). The Role of International Trade in Japan's Postwar Economic Growth. Journal of the Japanese and International Economies, 3(2), 174-200.
42. Suzuki, Y. (1991). The Postwar Japanese Economy: Its Development and Structure.
43. Tho, T. V. (2013). The Middle-Income Trap: Issues for Members of the Association of Southeast Asian Nations. VNU Journal of Economics and Business, 29(2), Article 2.
44. Toma, S.-G. (2019). Learning from the Asian tigers: Lessons in economic growth. Annals-Economy Series, 3, 63-69.
45. Tho, N. V., & Hieu, D. M. (2018). Challenges and Opportunities for Economic Growth in Vietnam. Journal of Economics and Development, 20(1), 1-16.
46. Trung, T. Q., & Hanh, P. T. H. (2019). Economic Growth and FDI Attraction in Vietnam: An Empirical Study (2000-2017). Journal of Economics and Development, 21(1), 15-27.
47. Thinh, D. X., & Truc, N. T. (2021). The Fourth Industrial Revolution (4IR) and Socioeconomic Development in Vietnam: Opportunities, Challenges, and Policy Implications. Journal of Science and Technology Policy and Management, 12(2), 1-19.
48. Thuy, L. T. P. & Hoa, D. T. T. (2019). Challenges and Opportunities in Vietnam's Economic Development: Evidence from a Provincial Level Analysis. Economics, Management and Sustainability, 4(3), 35-48.
49. Veerayooth Kanchoochat. (2015). The middle-income trap and East Asian miracle lessons. Rethinking Development Strategies after the Financial Crisis, 1, 55-66.
50. Wilcox, R. S. (1952). Government Controls in Japan. The Review of Economics and Statistics, 34(4), 360-371.
51. World Bank. (2019). Infrastructure and Economic Growth in East Asia.
52. WTO. (2021). World Trade Report 2021: Making Trade Work for People.
53. Yokoyama, N. (1998). Japan's Postwar Economic Recovery and Anglo-Japanese Relations, 1948-1962. Routledge.
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55. Zamengo, M. (2020). Vietnam: Economic growth, global relevance and middle-income trap. http://dspace.unive.it/handle/10579/17590
56. Zhou, S., & Hu, A. (2021). What Is the “Middle Income Trap”? In S. Zhou & A. Hu (Eds.), China: Surpassing the “Middle Income Trap” (pp. 1-32). Springer Nature. https://doi.org/10.1007/978-981-15-6540-3_1

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

How to cite

Vinh, H. X., Van, L. H., Vinh, N. T., Thao, N. T., Thao, N. T. P., Giang, L. T. H., & Nga, D. T. (2024). Middle-income traps: Experiences of Asian countries and lessons for Vietnam. Multidisciplinary Reviews, 7(5), 2024100. https://doi.org/10.31893/multirev.2024100

[1] Agénor, P.-R. (2017). Caught in the Middle? The Economics of Middle-Income Traps. Journal of Economic Surveys, 31(3), 771-791.

[2] Agénor, P.-R., Canuto, O., & Jelenic, M. (2012). Avoiding Middle-Income Growth Traps. The World Bank, Economic Premise, 98, 1-7.

[3] Aiyar, S., Duval, R., Puy, D., Wu, Y., & Zhang, L. (2018). Growth slowdowns and the middle-income trap. Japan and the World Economy, 48, 22-37.

[4] ASEF. (2020). Vietnam's Innovation Challenges and Opportunities. Asia-Europe Economic Review, 18(3), 213-230.

[5] Baumol, W. J., & Blinder, A. S. (2015). Macroeconomics: Principles and Policy. Cengage Learning.

[6] Bellwood, P., & Glover, I. (2023). Southeast Asia: From prehistory to history. Taylor & Francis.

[7] Bresser-Pereira, L. C., Araújo, E. C., & Costa Peres, S. (2020). An alternative to the middle-income trap. Structural Change and Economic Dynamics, 52, 294-312.

[8] Bulman, D., Eden, M., & Nguyen, H. (2017). Transitioning from low-income growth to high-income growth: Is there a middle-income trap? Journal of the Asia Pacific Economy, 22(1), 5-28.

[9] Checchi, D. (2019). The Economics of Education: Human Capital, Family Background and Inequality. Cambridge University Press.

[10] Doner, R. F., & Schneider, B. R. (2016). The Middle-Income Trap: More Politics than Economics. World Politics, 68(4), 608-644.

[11] Eichengreen, B., Park, D., & Shin, K. (2013). Growth Slowdowns Redux: New Evidence on the Middle-Income Trap (Working Paper 18673). National Bureau of Economic Research. https://doi.org/10.3386/w18673

[12] Estrada, G., Han, X., Park, D., & Tian, S. (2018). Asia’s middle-income Challenge: An overview. Emerging Markets Finance and Trade, 54(6), 1208-1224.

[13] Egwaikhide, F. O., & Omoluabi, E. J. (2007). Human Capital Development and Economic Growth: The Nigeria Experience. African Development Review, 19(2), 352-372.

[14] Felipe, J., Abdon, A., & Kumar, U. (2012). Tracking the middle-income trap: What is it, who is in it, and why?. Levy Economics Institute, Working Paper, (715).

[15] Findlay, C., & Vo Tri Thanh. (2015). Vietnam's Garment and Textile Industry: Opportunities and Challenges in Global Value Chains. Asian Economic Policy Review, 10(2), 298-315.

[16] Fung, H.-G., Lo, W.-C., & Leung, W. K. (1995). Evidence on the dynamic relationship between international trade and the stock market. The Journal of International Trade & Economic Development, 4(2), 171-183.

[17] Garrett, G. (2004). Globalization’s Missing Middle. Foreign Affairs, 83(6), 84-96.

[18] Gill, I., & Kharas, H. (2007). An East Asian Renaissance: Ideas for Economic Growth. Washington, DC: World Bank. https://doi.org/10.1596/978-0-8213-6747-6

[19] Glawe, L., & Wagner, H. (2016). The Middle-Income Trap: Definitions, Theories and Countries Concerned-A Literature Survey. Comparative Economic Studies, 58(4), 507-538.

[20] Hsu, K.-H., & Hsu, C.-Y. (2011). Capital structure and financing decision-evidence from the four Asian Tigers and Japan. African Journal of Business Management, 5(15), 6527-6540.

[21] Hu, X., Wan, G., Yang, C., & Zhang, A. (2023). Inequality and the middle-income trap. Journal of International Development, 35(7), 1684-1710.

[22] Hutterer, K. L. (2020). Economic Exchange and Social Interaction in Southeast Asia: Perspectives from Prehistory, History, and Ethnography. University of Michigan Press. https://library.oapen.org/handle/20.500.12657/41852

[23] Im, F. G., & Rosenblatt, D. (2015). Middle-income traps: a conceptual and empirical survey. Journal of International Commerce, Economics and Policy, 6(03), 1550013.

[24] Japan's Economic Miracle: Underlying Factors and Strategies for the Growth. Journal of Policy Modeling, 20(5), 553-570.

[25] Johnson, C. (1982). Economic Policy and Industrial Growth in Japan. World Development, 10(6), 429-475.

[26] Kanatsu, T. (2014). The Asian Tigers. In Routledge Handbook of the History of Global Economic Thought. Routledge.

[27] Kharas, H., & Kohli, H. (2011). What Is the Middle Income Trap, Why do Countries Fall into It, and How Can It Be Avoided? Global Journal of Emerging Market Economies, 3(3), 281-289.

[28] Krueger, A. O. (1974). Government Intervention in the Japanese Economy: Postwar Patterns and Sources. The American Economic Review, 64(2), 214-219.

[29] Meng, C. W. (1977). The Singapore Economy: Past Performance, Current Structure and Future Growth Prospects. Southeast Asian Affairs, 220-229.

[30] Ministry of Agriculture and Rural Development. (2021). Vietnam's Agricultural Outlook.

[31] Muggah, R., & Prata, A. (2019). Common Challenges for Developing Countries in the 21st Century. Global Policy, 10(Suppl 2), 8-14.

[32] Ohno, K. (2015). The middle-income trap in Vietnam: Current situation and solutions. https://dlib.neu.edu.vn/handle/NEU/36001 (in Vietnamese)

[33] Paus, E. (2017). Escaping the Middle-Income Trap: Innovate or Perish (Issue 685). Asian Development Bank. https://www.adb.org/publications/escaping-middle-income-trap-innovate-or-perish

[34] Patrick, H., & Park, Y. C. (2005). Japan's Economic Revival: Policy Challenges in a Globalized World. Edward Elgar Publishing.

[35] Psacharopoulos, G., & Patrinos, H. A. (2018). The Contribution of Education to Economic Growth: International Evidence. The World Bank Research Observer, 33(2), 141-159.

[36] United Nations Development Programme. (2021). Vietnam: Rising Inequality and Growing Urban-Rural Disparities.

[37] Ranis, G., & Stewart, F. (1993). Japan's Postwar Economic Recovery: Lessons for Developing Countries. World Development, 21(9), 1459-1473.

[38] Schoppa, L. J. (1997). Economic Planning and Policies in Postwar Japan: The Case of a Revolution Postponed. Journal of Japanese Studies, 23(2), 241-265.

[39] Schenk, C. (2008). Economic History of Hong Kong. EH.Net Encyclopedia. https://eh.net/encyclopedia/economic-history-of-hong-kong/

[40] Shiraishi, & Pham Cong Danh. (2019). Vietnam's Economic Transformation: Lessons for Other Developing Countries. National University of Singapore Press.

[41] Stern, R. M., & Tyler, W. R. (1979). The Role of International Trade in Japan's Postwar Economic Growth. Journal of the Japanese and International Economies, 3(2), 174-200.

[42] Suzuki, Y. (1991). The Postwar Japanese Economy: Its Development and Structure.

[43] Tho, T. V. (2013). The Middle-Income Trap: Issues for Members of the Association of Southeast Asian Nations. VNU Journal of Economics and Business, 29(2), Article 2.

[44] Toma, S.-G. (2019). Learning from the Asian tigers: Lessons in economic growth. Annals-Economy Series, 3, 63-69.

[45] Tho, N. V., & Hieu, D. M. (2018). Challenges and Opportunities for Economic Growth in Vietnam. Journal of Economics and Development, 20(1), 1-16.

[46] Trung, T. Q., & Hanh, P. T. H. (2019). Economic Growth and FDI Attraction in Vietnam: An Empirical Study (2000-2017). Journal of Economics and Development, 21(1), 15-27.

[47] Thinh, D. X., & Truc, N. T. (2021). The Fourth Industrial Revolution (4IR) and Socioeconomic Development in Vietnam: Opportunities, Challenges, and Policy Implications. Journal of Science and Technology Policy and Management, 12(2), 1-19.

[48] Thuy, L. T. P. & Hoa, D. T. T. (2019). Challenges and Opportunities in Vietnam's Economic Development: Evidence from a Provincial Level Analysis. Economics, Management and Sustainability, 4(3), 35-48.

[49] Veerayooth Kanchoochat. (2015). The middle-income trap and East Asian miracle lessons. Rethinking Development Strategies after the Financial Crisis, 1, 55-66.

[50] Wilcox, R. S. (1952). Government Controls in Japan. The Review of Economics and Statistics, 34(4), 360-371.

[51] World Bank. (2019). Infrastructure and Economic Growth in East Asia.

[52] WTO. (2021). World Trade Report 2021: Making Trade Work for People.

[53] Yokoyama, N. (1998). Japan's Postwar Economic Recovery and Anglo-Japanese Relations, 1948-1962. Routledge.

[54] Zakov, G. (2017). The economic miracle of the four Asian tigers. VUZF Review, 2, 90.

[55] Zamengo, M. (2020). Vietnam: Economic growth, global relevance and middle-income trap. http://dspace.unive.it/handle/10579/17590

[56] Zhou, S., & Hu, A. (2021). What Is the “Middle Income Trap”? In S. Zhou & A. Hu (Eds.), China: Surpassing the “Middle Income Trap” (pp. 1-32). Springer Nature. https://doi.org/10.1007/978-981-15-6540-3_1

Abstract

References

How to cite