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Economic Convergence, Capital Accumulation, and Income Traps: Empirical Evidence
Author(s) -
Park CynYoung,
Mercado Rogelio V.
Publication year - 2020
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/roiw.12398
Subject(s) - economics , human capital , income distribution , convergence (economics) , distribution (mathematics) , sample (material) , middle income trap , net national income , demographic economics , revenue , gross income , macroeconomics , public economics , economic growth , inequality , geography , china , state income tax , mathematical analysis , chemistry , mathematics , archaeology , tax reform , chromatography , accounting
This paper examines the factors that increase the likelihood of economic transition to higher income status, thereby attempting to answer the question of why some economies move to a higher income country group while others do not. Using a quintile income distribution approach, we identify 62 economies that moved to a higher quintile income group in each decade from 1960s to the 2010s out of a sample of 182 economies. Our findings show that higher physical and human capital growth and oil revenues are significantly associated with a greater probability of transitioning to higher quintile income group, although their effects vary not only across income groups within a sample period but also across different periods. Our results indicate that economies that have attained substantial capital accumulation (either physical or human, or combination thereof) and/or are blessed with natural resources have avoided income traps and demonstrated a successful and often steady transition to higher income groups.