“The Middle-Income Trap 2.0: The Increasing Role of Human Capital in the Age of Automation and Implications for Developing Asia” is the title of the latest paper published by Prof. Dr. Helmut Wagner and Linda Glawe. In this paper, they modify the concept of the middle-income trap against the background of the Fourth Industrial Revolution and future challenges of automation. You can find the whole text here.
CEAMeS Discussion Paper No 15 | 2018
Linda Glawe and Helmut Wagner
Also distributed as SSRN Paper No. 3263458
In our paper, we modify the concept of the middle-income trap (MIT) against the background of the Fourth Industrial Revolution and the (future) challenges of automation (creating the concept of the “MIT 2.0”). In particular, we analyze the impacts of automation, artificial intelligence, and digitalization on the growth drivers of middle-income countries and the MIT mechanism. We show that automation reduces the initial growth push for developing countries and leads to an earlier MIT at the lower end of the middle-income range. In addition, once wages start rising, the necessary shift in the growth strategy (from an export-manufacturing based to an innovation-productivity based growth model) is afflicted with higher requirements, particularly regarding human capital. This in turn, will lead to a higher persistence of the trap and it will become more difficult to break out of it. Thus, the MIT 2.0 will be much more challenging than today’s “normal” MIT. Our findings suggest that improving human capital accumulation, particularly the upgrading of skills needed with the rapid advance of automation, will be key success factors for overcoming the MIT 2.0. Against this background, we elaborate the implications for developing Asia regarding their probability to experience an MIT 2.0 (with a special focus on human capital as well as higher cognitive and information communication technology skills).
Read Full Article [pdf]
Professor Dr. Helmut Wagner and Michael Murach published a new CEAMeS Discussion Paper. The paper “Avoiding the middle-income trap: Korean lessons for China?” has been written together with Dr. Jungsuk Kim (from Sejong University in Seoul) and Dr. Donghyun Park (from the Asian Development Bank in Manila). The paper analyses and compares the pattern of economic growth and development of China and Korea in the post-war period. It is the first CEAMeS Discussion Paper that was written within an international collaboration. Dr. Donghyun Park also gave a guest lecture at the FernUniversität in Hagen in October 2016. You can find the full text here.
CEAMeS Discussion Paper No 14 | 2018
Michael Murach, Helmut Wagner, Jungsuk Kim and Donghyun Park
We analyze and compare the pattern of economic growth and development of China and South Korea in the postwar period. Geographical proximity and cultural affinity between the two countries, as well as the key role of the developmental state in the economies of both countries, suggests that an analytical comparison would be a meaningful and valuable exercise. Furthermore, Korea is one of the few economies that jumped from middle income to high income in a short period, and thus offers potentially valuable lessons for China. The Asian giant moved from low income to middle income very quickly but now faces the challenge of graduating to high income. In this paper, we empirically assess the main drivers of economic growth in China and Korea, and then identify the time period when Korea was at a similar state of structural change as today’s China. In addition, we examine the trend and pattern of Korea’s economic growth from that point on. We will analyze and compare key reforms that promoted growth in the two countries. Lastly, we sift through our empirical evidence to assess the prospects for China to follow Korea’s footsteps in transitioning from middle income to high income relatively quickly.
Read Full Article [pdf]