The Middle-Income Trap and Competition Policy: An Institutional Analysis

Abstract

Abstract This article studies a potential link between the middle-income trap and competition policy. It analyzes how a country’s competition policy relates to the transition process from the middle-income stage to the high-income stage, and what features of competition policy are accompanying a countryʼs successful leap from the middle-income group of countries. We find that to avoid falling into the middle-income trap, a country should have an appropriate institutional environment, which includes rigorous adherence to the rule of law, high regulatory quality, and high government effectiveness. It seems necessary to introduce competition policy as early as possible for countries in the upper middle-income stage. The quality of competition law and the independence of the competition authority must be guaranteed.