Middle Income Trap: Panel Data Analysis on Upper Middle Income Countries

The purpose of the dissertation is to put forward the possibility of middle income trap and the social and economic indicators to help avoid it for a selected group of upper middle income countries by employing convergence and panel data analyses during the period of 1982-2012. Unconditional convergence analysis demonstrated that initial per capita income level of relevant country group increased during the period. Country performances are separately analyzed through unit root analysis and it was shown that 15 of the countries converged to the high income countries while the rest 13 diverged. Panel data analyses resulted that the possibility of middle income trap are high not only for countries which are diverged but also for converged ones, among which Turkey is listed provided that those countries failed to keep up with structural change in their economies. The results of empirical analyses put forward that the risk of middle income trap depends on not only the quantitative increases in per capita income but also the level of structural change in the economy.