Dr. Rogelio Mercado's co-authored research paper with Cyn-Young Park on ‘Economic Convergence, Capital Accumulation, and Income Traps: Empirical Evidence’ will be published in the Review of Income and Wealth (click to read).
The paper examines the factors that increase the likelihood of economic transition to higher income status, thereby attempting to answer the question of why some economies move to a higher income country group while others do not. Using a quintile income distribution approach, the study identifies 62 economies that moved to a higher quintile income group in each decade from 1960s to the 2010s out of a sample of 182 economies. Their findings show that higher physical and human capital growth and oil revenues are significantly associated with a greater probability of transitioning to higher quintile income group, although their effects vary not only across income groups within a sample period but also across different periods. The results indicate that economies that have attained substantial capital accumulation (either physical or human, or combination thereof) and/or are blessed with natural resources have avoided income traps and demonstrated a successful and often steady transition to higher income groups.
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