Convergence Debate, Middle-Income Trap, and East Asian Miracle

zhao, guo (2024): Convergence Debate, Middle-Income Trap, and East Asian Miracle.

Abstract

Three key economic issues are the convergence debate, the middle-income trap, and the East Asian Miracle. Here we show that the standard Solow-Swan growth model in discrete time can simultaneously account for these key economic issues if in addition the no arbitrage constraint is imposed on the growth of total wealth. Under perfect arbitrage, club convergence is a pervasive feature of dynamic economies with realistic structural characteristics, but conditional converge may emerge as a limiting case. Following the standard Solow-Swan growth, a middle-income economy may make a miracle growth at the cost of structural unemployment if the rate of saving and investment exceed certain threshold level. These findings deepen our understanding of the impacts of capital accumulation on the dynamic evolution of economic system.

• Item Type: MPRA Paper
• Language: English
• Keywords: Convergence Debate, Middle-Income Trap, East Asian Miracle
• Subjects: D - Microeconomics > D2 - Production and Organizations; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy

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