It is a situation where a middle-income country is unable to
become high income country as the situations for growth are slowing/ advantages
which a country had is no longer present
Eg: A country has grown rapidly in industry due to cheap labour.
As the country grew, the wages increased and hence the initial advantage of
lower cheap labour diminished. Similarly, the manufacturing firms may shift to
some country where the labour wages are lower than this country.
Hence, the GNP may get stagnated unless there is something
the country does to overcome limitations. (commonly called reforms).
The reforms might be 1) Labour 2) Land 3) Capital/Investment etc
Challenges: If the administrative structure/information/expertise
is lacking in recipient country, there may be unhealthy growth ( skewed distributing
of income, cartelisation in businesses, plutocrats taking undue advantage) .
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