The middle-income trap from a Schumpeterian perspective

By Philippe Aghion and Çağatay Bircan

In this paper we provide an outline for viewing the middle-income trap through the lens of the Schumpeterian growth paradigm, which places the notion of creative destruction at the centre of economic growth. Economic growth and development come from structural transformation, which is the interplay between changes in economic structure and supporting institutions at different stages of development. We look at the building blocks of economic development and how institutional factors affect the evolution of firm growth and competitive interaction.