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Which industries are the best at pulling a country out of the Middle-Income Trap? Do all countries facing that trap require the same solutions?

Many poor countries-- in East Asia especially-- were able to improve their economic conditions greatly by becoming manufacturers for companies based elsewhere. Thailand, for example, manufactures an enormous number of pickup trucks for automakers that are based overseas. Thailand can employ many assemblers, but fewer engineers; the engineers are based in Japan and the U.S. 

The problem is, there is only so much money that can be made from manufacturing other people's stuff. Countries like Thailand will need to invest in their own development if they want to become a wealthy nation. They will need to produce (and employ!) their own engineers. The Middle-Income Trap occurs when the money to be made from manufacturing is so attractive in the short term that policy makers are unable to make sacrifices for the sake of the long term. 

What industries are the most effective at punching through this barrier and spurring the growth of high-income activities? Are they the same industries for all countries, or will Thailand, for example, need a different set of solutions than, say Vietnam?

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Question added by Scott Mikalauskis , Predictive Analytics
Date Posted: 2017/09/23
Muhammad Wali
by Muhammad Wali , Headmaster , Ningrahar high School

agriculture and grading is Middle-income.

Emad Abu-Zaid
by Emad Abu-Zaid , Factory Manager , Shyaw Dairy & Ice Creme Industries

 

Progressing to the high income stage is more difficult. According to the dominant view, success hinges on an economy’s ability to continue raising Total Factor Productivity (TFP) by moving up the manufacturing, service, or agriculture value chain toward higher-value-added activities that require more sophisticated technologies, higher-quality human capital, and intangible assets like design and organizational capabilities.

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