TITLE:
A Study on the Relationship between Developing Countries and the Middle-Income Trap: A Nar-rative in the Zambian Perspective
AUTHORS:
Brian Kapotwe
KEYWORDS:
Middle-Income Trap, Convergence, Economic Growth, GDP Per Capita
JOURNAL NAME:
Modern Economy,
Vol.12 No.2,
February
26,
2021
ABSTRACT: While the Middle-Income Trap (MIT) has gained popularity
in Europe, Asia and America in the past 15 years, little data exists about its
impact on Africa. This is because, until recently, Africa had recorded minimal
economic growth. However, since the year 2000, several African countries have
recorded rapid economic growth to attain middle-income status, but very few
have transitioned to high-income levels. This study aimed to establish Zambia’s
standing regarding the MIT. A unit root model was used to test for income
convergence between Zambia and the United States of America (US). In line with
the study model, income convergence is equivalent to the absence of unit root
in the natural log difference in per capita income between the US and Zambia.
The Augmented Dickey-Fuller, Phillips-Perron test which accounts for serial
correlation and GLS detrended augmented Dickey-Fuller test were used to test for the unit root. All
tests identified unit root indicating the lack of GDP per capita convergence
between Zambia and the US. These results indicate Zambia is at a high risk of
falling into MIT. To break from the MIT, Zambia should diversify its economy
and shift from input led growth to growth based on economic efficiency. The
lack of sustained economic growth in Zambia is due to 1) the inability to
identify new growth drivers at the middle-income stage, 2) failure to institute
the required political and institutional reforms to sustain growth at MIC
level.