Two manifestations of the middle-income trap
in East-Central Europe
Tamás Tibor Csontos
Institute of World Economics
Centre for Economic and Regional Studies
Global Economic Observer – No. 2, Vol. 12 / 2024
Abstract
The paper attempts to reinterpret the concept of the middle-income trap and develops the theory of participation and self-effort. On this basis, the paper distinguishes two different types of middle-income traps. The exclusion trap, which is the result of a one-sided focus on the self-effort, and the vulnerability trap, which is the result of a one-sided focus on participation. The model argues that catching-up can be achieved when the participation and the self-effort are in harmony. The paper also uses this approach to analyse the middle-income trap in East-Central European countries, demonstrating the empirical validity of the theory. It associates
socialist planned economies with the exclusion trap, while identifying the dependent market economy model that emerged after regime change with the vulnerability trap.
Keywords: middle-income trap, East-Central Europe, dependent market economy
JEL Classification: O14, O52, P52
