The “middle-income trap” has recently become a powerful buzzword in the international development community. Despite using the same phrase, the existing literature varies considerably. The objective of this paper is twofold. First, it represents one of the earliest attempts at reviewing this burgeoning area of research. Based on differences in theoretical underpinnings and policy implications, the literature is classified into three groups: (1) getting education and institutions right; (2) changing export compositions by following comparative advantage; and (3) industrial upgrading by the proactive state. Second, it examines the validity of these three bodies of literature through catching-up experiences of selected newly industrializing economies in East and Southeast Asia. It argues that each strand falls into a different trap: the causal, the historical, and the practical. In discussing these three traps, this paper provides six propositions based theoretically on old-school development economics and innovation literature.

Veerayooth Kanchoochat, Patarapong Intarakumnerd

Published in Berlin Working Papers on Money, Finance, Trade and Development, February 2014