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UN Department of Economic and Social Affairs (DESA) Working Papers

The UN Department of Economic and Social Affairs (DESA) Working Papers aim to stimulate discussion and critical comment on the broad range of economic, social and environmental issues associated with the United Nations Development Agenda.

English

Will Inequality Lead China to the Middle Income Trap?

China has departed from the East Asian model of development by letting inequality to rise to a high level, which is contributing to China’s current problems of macroeconomic imbalance, declining efficiency of capital, and rising social tensions. If inequality persists, China may get caught in the “inequality-trap,” which may then lead it to the “middle income trap (MIT).” Fortunately, China still has the levers to pull to reduce inequality and avoid MIT. Measures along both the “wage route” and the “redistributive route” can be adopted for this purpose. In addition, China may pursue the “cooperative route” to more equitable distribution.

English

Keywords: Middle Income Trap, Inequality Trap, Cooperatives, Inequality, Redistribution, China
JEL: O5: Economic Development, Innovation, Technological Change, and Growth / Economywide Country Studies; O1: Economic Development, Innovation, Technological Change, and Growth / Economic Development; O4: Economic Development, Innovation, Technological Change, and Growth / Economic Growth and Aggregate Productivity
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