The term “middle income trap” has been coined by Nobel-prize winning economist Robert Fogel. He states that the majority of countries find it easier to advance from the group of low-income states to that of middle-income ones than making the passage to the high-income category through further GNI growth. Reaching the middle-income status is relatively quickly achievable, provided – in most cases -- that the market is liberalized, labour is cheap and raw materials are available. These factors, however, prove insufficient after a while, as improving living conditions lead to rising wage costs and raw material reserves are depleted. Thus, other steps are required to maintain competitive edge and make further progress.

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(Ministry for National Economy)