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Middle Income Trap: Institutional and Cognitive Foundations

Middle Income Trap: Institutional and Cognitive Foundations

Journal of Institutional Studies, , Vol. 12 (no. 2),

The middle-income trap is a well-known phenomenon that the growth of per capita GDP slows sharply after reaching a certain level. This is usually associated with an increase in labor costs – the price of labor in the country becomes higher than in poor countries, and advanced technologies that could ensure the growth of labor productivity are not available. In the article, an ideational hypothesis is used to explain this phenomenon. It is assumed that the ideals and values of actors influence institutions, and institutional conditions largely determine the rate of economic growth. Thus, factors exogenous with respect to the national economy – ideals of intellectuals and international institutions that regulate economic relations – are included in the analysis. The conviction of intellectuals in the existence of a simulacrum of world science contributes to the orientation of national business towards joining the world elite. The latter legitimizes the predatory export of capital and the acquisition of foreign assets, which reinforces the dependence of semi-peripheral countries on world hegemonic policies. Corruption in middle-income countries reinforces this dependence. The trap is also stabilized with the help of a “performance society” culture, when in a semi-peripheral country, financial resources are invested in the development of professional sports and the entertainment industry, but not in domestic R&D.

Keywords: middle-income trap; post-industrial society; intellectuals; corruption; “performance society”

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