Income traps for different income groups: An empirical investigation

This data is used to investigate the income traps for different income groups by checking the stationarity of per capita income time series with breaks, if they exist. The upper and lower-middle-income traps are reviewed for 25 upper and 12 lower-middle-income countries by employing the Augmented Dickey-Fuller, Zivot- Andrews with one break, and Lee-Strazicich with two breaks test procedures over 1987-2019. Besides, by predicting their income trends, the study tests whether if five newly high-income countries Chile, Mauritius, Panama, Romania, Uruguay can close the income gap with the advanced countries.
The empirical findings show that 18 out of 25 upper-middle-income countries and 8 out of 12 lower-middle-income countries are in the upper and lower-income trap, respectively. China is the only country that gives the hope of becoming a part of the high-income group in the following years. The findings for seven upper-middle and four lower-middle countries are ambiguous. The empirical findings of the five newly high-income countries show that Panama is on the way to catching up with the high-income group. The same ambiguity applies for Romania and Mauritius, while Uruguay and
Chile are likely to stay at the lowest level of the high-income group that can be described as the “lowerhigh-income trap.”