Main Article Content

Department of International Trade and Finance, Istanbul Gedik University, Istanbul, Turkey
Department of Econometrics, Istanbul University, Istanbul, Turkey
Yaşar Serhat YAŞGÜL
Department of Economics, Marmara University, Istanbul, Turkey
Vol 27 No 1 (2018), Articles, pages 145-158
Submitted: 26-06-2018 Accepted: 26-06-2018 Published: 26-06-2018
Copyright How to Cite


The E7 countries (China, India, Brazil, Russia, Mexico, Indonesia and Turkey)
that have been growing fast since 1990s have been under the middle income country
category according to the income category classification of the World Bank for a long
period of time. Researchers have been interested especially in emerging economies that
have not been able to move up from the middle income category to the high income
category and this has led to the initiation of what’s called the ‘middle income trap’ (MIT)
discussions in literature. The MIT is generally defined as the countries under the middle
income category failing to move up to the high income category. Therefore, the purpose of
this study is to identify the presence of MIT in E7 countries that hold an important
position in global economy. The unit root tests were used in the empirical phase of the
study. This study’s difference from other studies is the fact that both the time series and
the panel data unit root tests were used both in linear and nonlinear forms, thus
preventing the misleading results created by choosing the wrong model specification.
The USA was taken as the reference country in the study and the GNI per capita
according to the Atlas method (current US$) data of the World Bank was used for the E7
countries for the period 1969-2015. To achieve consistency in the analysis results, Russia
was not included in the model as there were no data available for the same period for
Russia given the fact that the same timeframe should be taken as the basis for all
countries. The empirical analysis showed that the E7 countries do not fall into the MIT.
Cited by

Article Details


Anoruo, E., and V.N.R. Murthy (2014). Testing nonlinear inflation convergence for the Central African Economic and Monetary Community. Int. J. Econ. Financ Issues 4(1), 1–7.

Bahmani-Oskooee, M., and S.W Hegerty (2009). Purchasing power parity in lessdeveloped and transition economies: a review paper. Journal of Economic Surveys 23(4), 647–658.

Chang, Y. (2004). Bootstrap unit root tests in panels with cross-sectional dependency. Journal of Econometrics 120, 263–293.

Chong, T. T. L., M. J. Hinich, , V. K. S. Liewand, and K. P. Lim (2008). Time series test of nonlinear convergence and transitional dynamics. Economics Letters, 100(3), 337-339.

Cuestas, J.C., and C. Ramlogan-Dobson(2013). Convergence of inflationary shocks: evidence from the Caribbean. The World Economy, 36(9), 1229-1243.

Cuestas, J.C., and D. Garratt (2011). Is real GDP per capita a stationary process? smooth transitions, nonlinear trends and unit root testing. Empirical Economy. 41, 555–563.

Dash, A. K., and A. K. Tiwari (2015). Are tourist arrivals stationary? Evidence from BRIC countries. Current Issues in Tourism, 1-4.

Demetrescu, M., and C. Hanck (2012). Unit root testing in heteroscedastic panels using the Cauchy estimator. Journal of Business & Economic Statistics, 30(2), 256-264.

Dickey, D. A., and W. A. Fuller (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American statistical association, 74(366a), 427431.

Dickey, D. A., and W. A. Fuller (1981). Likelihood ratio statistics for autoregressive time series with a unit root. Econometrica: Journal of the Econometric Society, 1057-1072.

Eichengreen, B., D. Park and K. Shin (2013). Growth slowdown redux: new evidence on the middle income trap. NBER Working Paper Series No. 18673, January 2013.

Emirmahmutoglu, F., and T. Omay (2014). Reexamining the PPP hypothesis: A nonlinear asymmetric heterogeneous panel unit root test. Economic Modelling 40, 184-190.

European Policies Initiative (2016). State of the Union: findings of the European catch-up index. (accessed 01.07.2016).

Felipe, J., A. Abdon, and U. Kumar (2012). Tarcking the middle-income trap: What is it, Who is in it, and why?, Levy Economics Institute of Bard College, Working Paper No. 715, 159.

Gill, I., H. Kharas, D. Bhattasali, M. Brahmbhatt, G. Datt, M. Haddad, E. Mountfield, R. Tatucu, E. Vostroknutova. (2007). An East Asian reneissance, ideas for economics growth. The International Bank for Reconstruction and Development/The World Bank.

Guisan, M.C. (2017). Manufacturing And Economic Development In The World For 20002015: Main Features And Challenges, Revista Galega De Economia, Vol. 26-3.1

Im, K. S., H. Pesaran, and Y. Shin (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics 115, 53–74.

IMF (2016). World economic outlook, too slow for too long.

Kapetanios, G., Y. Shin, and A. Snell (2003). Testing for a unit root in the nonlinear star framework. Journal of Econometrics 12, 359–379.

Kasjanovs, I. (2015). Is part of the Latvian economy already in the middle-income trap?. World Economics, vol. 16, issue 1, 58-69.

Koçak, E. and Ü. Bulut (2014). Orta gelir tuzağı: teorik çerçeve, ampirik yaklaşımlar ve Türkiye üzerine ekonometrik bir uygulama, Maliye Dergisi, No. 167, 1-21.

Kruse, R. (2011). A new unit root test against ESTAR based on a class of modified statistics. Stat. Pap. 52, 71–85.

Lee, C., and D. Narjoko (2015). Escaping the middle-income trap in Southeast Asia: micro evidence on innovation, productivity, and globalizatin. Asian Economic Policy Review, 10, 124-147.

Levin, A., C. Lin, and C. J. Chu (2002). Unit root tests in panel data: asymptotic and finite sample properties. Journal of Econometrics 108, 1–24.

Ng, S., and P. Perron (2001). Lag length selection and the construction of unit root tests with good size and power. Econometrica, 69(6), 1519-1554.

Ohno, K. (2010). Avoiding the middle income trap: renovating industrial policy formulation in Vietnam. Expanded and updated version of the paper originally published in the ASEAN Economic Bulletin, vol. 26, no.1, 25-43.

Öztürk, A. (2016). Examing the economics growth and middle-income trap from the perspective of the middle class. International Business Review 25, 726-738.

Paus, E. (2012). Confronting the middle income trap: Insights from small latecomers, St Comp Int. Dev. 47, 115-138.

Perron, P. (1989). The great crash, the oil price shock, and the unit root hypothesis. Econometrica: Journal of the Econometric Society, 1361-1401.

PwC (2015). The world in 2050, will the shift in global economy power continue?. (accessed, 01.06.2016).

Robertson, P., E., and L. Ye (2013). On the existence of a middle income trap. Available at SSRN: or (accessed, 05.07.2016).

Sollis, R. (2009). A simple unit root test against asymmetric star nonlinearity with an application to real exchange rates in NORDIC countries. Economic Modelling 26, 118–125.

Staehr, K. (2013). Economic growth and convergence in the Baltic states: caught in a middle-income trap?. Intereconomics, Volume 50, Issue 5, 274-280.

The World Bank (2013). China 2030: building a modern, harmonious, and creative society. Development Research Center of the State Council, the People’s Republic of China.

The World Bank (2016). Country and lending groups. (accessed 15.07.2016).

The World Bank Statistics 2016.

Uçar, N., and T. Omay (2009). Testing for unit roots in nonlinear heterogeneous panels. Economics Letters 104, 5–8.

YE, L., and P. E. Robertson (2016). On the existance of middle-income trap, Economic Record, Vol. 92, No. 297, 173-189.

Yeldan, E., K. Taşçı, E. Voyvada, M. E. Özsan (2013). Orta gelir tuzağından çıkış: hangi Türkiye?. Cilt 2: Bölgesel Kalkınma ve İkili Tuzaktan Çıkış Stratejileri, Türkfonfed.