How Countries Can Avoid the “Middle-Income Trap”: Lessons from a Global EDB Study

Tashkent, Uzbekistan (UzDaily.com) — The Eurasian Development Bank (EDB) has published a new study on the so-called “middle-income trap” — a situation where a country’s economy stalls at the middle-income level and fails to advance to a higher tier.

The report, “The Middle-Income Trap: What to Do with a Hypothesis That Has No Common Definition?”, is based on an analysis of data from 132 countries over more than half a century, aiming to uncover why some economies break through to high-income status while others remain stagnant.

The study emphasizes that there is no universally accepted definition of the “middle-income trap.” Depending on the methodology used, the same country can be classified as either “stuck” or “successful.” This complicates objective assessments but does not prevent discussion of the key factors that enable nations to move into the high-income group.

According to the findings, since 2000, out of 92 middle-income countries, 27 have successfully transitioned to high-income status — evidence that the “trap” is not inevitable. Particular attention is given to Russia and Kazakhstan, which are positioned on the border between middle and high income levels. For these states, understanding the drivers of long-term growth is especially relevant, while other countries in the region can use the study’s insights to prevent future stagnation.

The authors classify definitions of the “trap” into three main approaches:

Qualitative — broadly describing the trap without numerical criteria, focusing on real development issues but relying heavily on subjective judgment.

Absolute quantitative — identifying an inability to surpass a specific income threshold per capita.

Relative quantitative — highlighting failure to catch up with developed countries in per capita income.

These differing approaches yield varying conclusions on the frequency of countries falling into the “trap,” making it impossible to draw definitive judgments about any single economy.

Nonetheless, econometric analysis of data from 1960 to 2020 shows that the key factors influencing income transitions remain relatively consistent across definitions. Among the most significant are: sound macroeconomic conditions, consistently low inflation, investment inflows, development of innovation and human capital, improved institutional quality, and stable demographics.

The authors stress that while the “middle-income trap” is a useful concept for debating development challenges, experts should avoid hastily labeling countries as “trapped.” With the right economic and social policies, nations can successfully overcome this barrier.

The EDB report highlights that strategies focused on sustainable growth and human capital development not only help countries move beyond middle-income status but also secure their place among high-income economies, ensuring long-term economic stability.