EFN Asia Conference 2013 “Asia, the Middle Income Trap and Economic Freedom” 21-22 October 2013, Bangkok, Thailand Fred McMahon, Fraser Institute
The Middle Income Trap • The wage squeeze – Squeezed from below by newly emerging stations – Squeezed from above by advanced nations
• Education and training – An immense struggle – Culture may play a role – But poorly structured government education a big contributor
The Middle Income Trap 2 • Policy stall – It worked in the past – Simple exhaustion – Emergence of new interest groups to stifle reform
Economic freedom in Asia 8.5 7.5 6.5
Summary Rating (Rank)
5.5 4.5 3.5 2.5
Area II: Legal Structure and Property Rights
Economic freedom in Asia 9 8
Summary Rating (Rank)
7 6 5 4 3 High Income
Mid/Low Income
Area II: Legal Structure and Property Rights
• On left, economic freedom, 3.0 – 9.5 • On right, per capita GDP, 2005 constant US dollars (except for Taiwan, constant PPP)
Hong Kong $40,000
9
$35,000
8
$30,000
7
$25,000 $20,000
6
$15,000
5
$10,000
Summary Rating (Rank)
Area II: Legal Structure and Property Rights
1 0 2
8 0 2
6 0 2
4 0 2
0 2
0 2
8 9 1
6 9 1
4 9 1
2 9 1
0 9 1
8 9 1
6 8 9 1
4 8 9 1
2 8 9 1
0 8 9 1
8 7 9 1
6 7 9 1
$0 4 7 9 1
3 2 7 9 1
$5,000
0 7 9 1
4
Per Cap GDP
Singapore $40,000
9
$35,000
8
$30,000
7
$25,000 $20,000
6
$15,000
5
$10,000
Summary Rating (Rank)
Area II: Legal Structure and Property Rights
1 0 2
8 0 2
6 0 2
4 0 2
0 2
0 2
8 9 1
6 9 1
4 9 1
2 9 1
0 9 1
8 9 1
6 8 9 1
4 8 9 1
2 8 9 1
0 8 9 1
8 7 9 1
6 7 9 1
$0 4 7 9 1
3 2 7 9 1
$5,000
0 7 9 1
4
Per Cap GDP
Taiwan $40,000
9
$35,000
8
$30,000
7
$25,000 $20,000
6
$15,000
5
$10,000
Summary
Area II: Legal Structure and Property Rights
1 0 2
8 0 2
6 0 2
4 0 2
0 2
0 2
8 9 1
6 9 1
4 9 1
2 9 1
0 9 1
8 9 1
6 8 9 1
4 8 9 1
2 8 9 1
0 8 9 1
8 7 9 1
6 7 9 1
$0 4 7 9 1
3 2 7 9 1
$5,000
0 7 9 1
4
Per cap GDP
Japan $40,000
9
$35,000
8
$30,000
7
$25,000 $20,000
6
$15,000
5
$10,000
Summary Rating (Rank)
Area II: Legal Structure and Property Rights
1 0 2
8 0 2
6 0 2
4 0 2
0 2
0 2
8 9 1
6 9 1
4 9 1
2 9 1
0 9 1
8 9 1
6 8 9 1
4 8 9 1
2 8 9 1
0 8 9 1
8 7 9 1
6 7 9 1
$0 4 7 9 1
3 2 7 9 1
$5,000
0 7 9 1
4
Per Cap GDP
South Korea $40,000
9
$35,000
8
$30,000
7
$25,000 $20,000
6
$15,000
5
$10,000
Summary Rating (Rank)
Area II: Legal Structure and Property Rights
1 0 2
8 0 2
6 0 2
4 0 2
0 2
0 2
8 9 1
6 9 1
4 9 1
2 9 1
0 9 1
8 9 1
6 8 9 1
4 8 9 1
2 8 9 1
0 8 9 1
8 7 9 1
6 7 9 1
$0 4 7 9 1
3 2 7 9 1
$5,000
0 7 9 1
4
Per Cap GDP
Philippines $40,000
9
$35,000
8
$30,000
7
$25,000 $20,000
6
$15,000
5
$10,000
Summary Rating (Rank)
Area II: Legal Structure and Property Rights
1 0 2
8 0 2
6 0 2
4 0 2
0 2
0 2
8 9 1
6 9 1
4 9 1
2 9 1
0 9 1
8 9 1
6 8 9 1
4 8 9 1
2 8 9 1
0 8 9 1
8 7 9 1
6 7 9 1
$0 4 7 9 1
3 2 7 9 1
$5,000
0 7 9 1
4
Per Cap GDP
Indonesia $40,000
9
$35,000
8
$30,000
7
$25,000 $20,000
6
$15,000
5
$10,000
Summary Rating (Rank)
Area II: Legal Structure and Property Rights
1 0 2
8 0 2
6 0 2
4 0 2
0 2
0 2
8 9 1
6 9 1
4 9 1
2 9 1
0 9 1
8 9 1
6 8 9 1
4 8 9 1
2 8 9 1
0 8 9 1
8 7 9 1
6 7 9 1
$0 4 7 9 1
3 2 7 9 1
$5,000
0 7 9 1
4
Per Cap GDP
Malaysia $40,000
9
$35,000
8
$30,000
7
$25,000 $20,000
6
$15,000
5
$10,000
Summary Rating (Rank)
Area II: Legal Structure and Property Rights
1 0 2
8 0 2
6 0 2
4 0 2
0 2
0 2
8 9 1
6 9 1
4 9 1
2 9 1
0 9 1
8 9 1
6 8 9 1
4 8 9 1
2 8 9 1
0 8 9 1
8 7 9 1
6 7 9 1
$0 4 7 9 1
3 2 7 9 1
$5,000
0 7 9 1
4
Per Cap GDP
Thailand $40,000
9
$35,000
8
$30,000
7
$25,000 $20,000
6
$15,000
5
$10,000
Summary Rating (Rank)
Area II: Legal Structure and Property Rights
1 0 2
8 0 2
6 0 2
4 0 2
0 2
0 2
8 9 1
6 9 1
4 9 1
2 9 1
0 9 1
8 9 1
6 8 9 1
4 8 9 1
2 8 9 1
0 8 9 1
8 7 9 1
6 7 9 1
$0 4 7 9 1
3 2 7 9 1
$5,000
0 7 9 1
4
Per Cap GDP
India $40,000
9
$35,000
8
$30,000
7
$25,000 $20,000
6
$15,000
5
$10,000
Summary Rating (Rank)
Area II: Legal Structure and Property Rights
1 0 2
8 0 2
6 0 2
4 0 2
0 2
0 2
8 9 1
6 9 1
4 9 1
2 9 1
0 9 1
8 9 1
6 8 9 1
4 8 9 1
2 8 9 1
0 8 9 1
8 7 9 1
6 7 9 1
$0 4 7 9 1
3 2 7 9 1
$5,000
0 7 9 1
4
Per Cap GDP
Bangladesh $40,000
9
$35,000
8
$30,000
7
$25,000 $20,000
6
$15,000
5
$10,000
Summary Rating (Rank)
Area II: Legal Structure and Property Rights
1 0 2
8 0 2
6 0 2
4 0 2
0 2
0 2
8 9 1
6 9 1
4 9 1
2 9 1
0 9 1
8 9 1
6 8 9 1
4 8 9 1
2 8 9 1
0 8 9 1
8 7 9 1
6 7 9 1
$0 4 7 9 1
3 2 7 9 1
$5,000
0 7 9 1
4
Per Cap GDP
Sri Lanka $40,000
9
$35,000
8
$30,000
7
$25,000 $20,000
6
$15,000
5
$10,000
Summary Rating (Rank)
Area II: Legal Structure and Property Rights
1 0 2
8 0 2
6 0 2
4 0 2
0 2
0 2
8 9 1
6 9 1
4 9 1
2 9 1
0 9 1
8 9 1
6 8 9 1
4 8 9 1
2 8 9 1
0 8 9 1
8 7 9 1
6 7 9 1
$0 4 7 9 1
3 2 7 9 1
$5,000
0 7 9 1
4
Per Cap GDP
China $40,000
9
$35,000
8
$30,000
7
$25,000 $20,000
6
$15,000
5
$10,000
Summary Rating (Rank)
Area II: Legal Structure and Property Rights
1 0 2
8 0 2
6 0 2
4 0 2
0 2
0 2
8 9 1
6 9 1
4 9 1
2 9 1
0 9 1
8 9 1
6 8 9 1
4 8 9 1
2 8 9 1
0 8 9 1
8 7 9 1
6 7 9 1
$0 4 7 9 1
3 2 7 9 1
$5,000
0 7 9 1
4
Per Cap GDP
Pakistan $40,000
9
$35,000
8
$30,000
7
$25,000 $20,000
6
$15,000
5
$10,000
Summary Rating (Rank)
Area II: Legal Structure and Property Rights
1 0 2
8 0 2
6 0 2
4 0 2
0 2
0 2
8 9 1
6 9 1
4 9 1
2 9 1
0 9 1
8 9 1
6 8 9 1
4 8 9 1
2 8 9 1
0 8 9 1
8 7 9 1
6 7 9 1
$0 4 7 9 1
3 2 7 9 1
$5,000
0 7 9 1
4
Per Cap GDP
Economic Freedom explains a great deal of the “middle income trap� if not everything It is something we can support and know we are making a difference for the better
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