Trapped in the middle? Developmental challenges for middle-income countries

By José Antonio Alonso, Professor at Universidad Complutense and member of the Spanish Co-operation Council and José Antonio Ocampo, Professor at Columbia University, and former UN Under-Secretary-General for Economic and Social Affairs and Finance Minister of Colombia – Editors of the recent book Trapped in the Middle? Developmental Challenges of Middle-Income Countries, Oxford: Oxford University Press, 2020


The intense growth enjoyed by a group of emerging economies during the last two decades drove some analysts to predict the beginning of a new stage of generalised economic convergence. In their vision, more and more middle-income countries (MICs) were likely to reach high-income status in the near future, taking advantage of the new opportunities provided by access to financial markets, information technology and international trade, including the development of global value chains.

Unfortunately, data have not confirmed these optimist predictions. Actually, up to now, economic convergence has been a selective opportunity for a small group of countries, and rather a generalised tendency for the whole group of MICs. Moreover, there is growing evidence that trespassing the low-income threshold and achieving middle-income status is not enough for countries to converge toward high-income levels. Few MICs have successfully completed that transition in recent decades, with the majority getting stuck in the middle-income group, thus facing what has come to be called the middle-income trap.

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Look East instead of West for the future global middle class

By Kristofer Hamel, Chief Operating Officer, and Baldwin Tong, Research Analyst, World Data Lab

India-middle-class-shopping
South City Mall in Kolkata, India

Poverty is declining worldwide. Yet, reducing poverty is not equivalent to a rising middle class. A large share of the world’s population earns between USD 2 and USD 11 a day (in 2011 purchasing power parity). Only once people start earning more than USD 11 do they tend to have enough extra spending power to make purchases that go beyond basic needs and therefore enter the global middle class. First-time middle-class purchases include personal transportation (motorcycles), housing (first-time renting or low-end purchases), finance (first savings account or loan) and education (tertiary).

Over the next decade, middle-class spending power will shift from west to east due to the huge growth in the middle-class segments (USD 11-USD 110 per day) of India and China. The middle classes of these two countries will represent over 83% of their respective country’s spending power, meaning that businesses should consider their tastes and preferences. Combined, the world’s two most populous countries are expected to represent over 43.3% of the global middle class by 2030.
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Who will drive consumer spending in the next decade?

By Kristofer Hamel, Chief Operating Officer, World Data Lab, and Homi Kharas, Interim Vice President, Brookings; Senior Economic Advisor World Data Lab1 

shoppingIn October 2018, the international community crossed a historic threshold: the majority of humanity no longer lives in or near poverty. Now and continuing into the foreseeable future, most people on Earth are middle class or rich. This tipping point is of interest to both the research community as well as global and regional companies searching for new markets.

But who exactly are these new middle-class consumers, and how will their profile change over the next decade?

Answering this question begins with an understanding of household classifications. Our projections (all per person spending according to 2011 purchasing power parity) designate households as those in extreme poverty (households spending below USD 1.90 per day), those in the lower middle class (households spending USD 11-50 per day) and those in the upper middle class (households spending USD 50-110 per day). Two other groups –households “vulnerable” to falling back into poverty as well as the “rich” who sit at the top end of the distribution – round out our classifications.
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How middle class are middle-income households in Latin America?

By Ángel Melguizo (OECD Development Centre) and Nora Lustig (Tulane University)

On labour informality and its causes

 One of the most important achievements of the recent period of economic expansion in Latin America has been the substantial reduction of poverty and the surge of an emerging middle class. According to World Bank estimates (Ferreira et al, 2013), in 2009 the Latin American population with a daily income of between 4 and 50 dollars a day (in parity of purchasing power) represents 68% in the region today, compared with 29% who still are moderate poverty. These ‘middle sectors’ are composed of 38% belonging to a vulnerable population, which has between 4 and 10 dollars a day, and 30% middle class, between 10 and 50 dollars. Continue reading