Convergence Speed and Growth Patterns: A Dynamical Systems Approach

The middle-income trap is an empirical economic phenomenon characterized by the slowdown in the growth trend of a given country. There are different definitions of a stagnant economy, but they all require an anti-causal computation and are binary by nature. This paper proposes a general approach based on past values of GDP or GNI relative to a high-income country to detect not only middle-income traps but also paths that lead to potential stagnation. We characterize growth patterns and identify the development stage of different countries and regions using the conceptual and mathematical framework of dynamical systems theory. The results show a strong correlation between the fastest-converging economies and their investment attractiveness.

Automated summary

The middle-income trap refers to the slowdown in the growth trend of a given country. This paper proposes a general approach to detect middle-income traps and potential stagnation paths based on past values of GDP or GNI relative to a high-income country. Using the framework of dynamical systems theory, the study characterizes growth patterns and identifies the development stage of different countries and regions. The results show a strong correlation between the fastest-converging economies and their investment attractiveness.