Development
Middle-Income Trap
Definition
The phenomenon where a country's growth stalls after reaching middle-income status, unable to compete with low-wage economies in manufacturing or with advanced economies in innovation.
Explanation
Countries that industrialize quickly through low-cost manufacturing often struggle to transition to higher-value production as wages rise. Only a handful of economies have successfully escaped the trap: South Korea, Taiwan, Singapore, and a few others. China is currently testing whether the world's largest middle-income country can break through. Latin American countries like Brazil and Mexico have been stuck at middle-income levels for decades.