Based on the experiences of 100 countries over the past 50 years, the World Bank observes that nations often encounter a "trap" when their annual per capita income reaches approximately 10% of the U.S. GDP, equivalent to $8,000 in 2024. As an LDCs Bangladesh's per capita income remains far below this threshold. However, it has the potential to flourish and thrive in the world economy.
The middle income trap is a common problem among middle-income countries that are trying to become high-income countries. The problems lie in the fact that the country has increased savings and thus increased investments. Which will ultimately lead to it becoming an advanced country with a high income, but the problem is that some countries do not realize the importance of investing in technology and promoting innovation or even learning from the idea of transferring technology between developing countries.
The concept of the middle-income trap is somewhat relevant to newly graduated economies from LDCs during their transition, but its applicability depends on specific conditions. These economies are at risk of falling into the trap if they fail to diversify their economies, upgrade technology, and move from low-cost labor-driven growth to innovation-driven growth.
However, as they are still transitioning, their immediate challenge is to consolidate their gains by building stronger institutions, infrastructure, and human capital. The middle-income trap becomes more critical once it stabilises and moves toward sustained middle-income levels. Thus, while it’s not entirely appropriate during the transition, it is a potential risk for the near future if structural reforms are not undertaken.
- Badges
- Science topic
- Similar topics
- Computer Communications (Networks)
- Simulators