Complexity systems and middle-income trap: the long-term roots of Latin America underdevelopment

Fernanda Cimini,Leonardo Costa Ribeiro,Jorge Britto

doi:10.1590/0103-6351/6190

Fernanda Cimini, Leonardo Costa Ribeiro + Show 1 more

Open Access

https://doi.org/10.1590/0103-6351/6190

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Abstract

Abstract Our intent is to reinterpret the concept of middle-income trap using the language of the complex system approach to refer to the unpredictability, non-linearity and the enormous range of possible behaviors of economic development in the long-term time series. By redefining the concept of trap in those terms, we propose to shed light on the institutional background of economic development. In order to advance our argument, we conduct a case study of Latin America, a region that has presented an unstable and non-linear economic trajectory across the 20th century. We argue that the combination between the colonial economic legacy and the political fragmentation amid the process of independence shaped the socio-economic structure and institutional capabilities for years to come, restricting the possibilities of overcoming underdevelopment.

Highlights

The world’s economic history shows that long-term growth rates have fluctuated widely over time
Our main finding was that the overall dynamics of GDP per capita in the 20th Century differentiate India and Latin American countries from the central capitalist countries according to their level of persistence: the trav.30 n.especial 2020 Nova Economia 1251
The lack of a persistent economic trajectory can be interpreted as an absence of organized behavior among economic agents, which cannot be disentangled from the absence of an institutional background able to coordinate and generate endogenous development

Summary

Introduction

The world’s economic history shows that long-term growth rates have fluctuated widely over time. In order to tackle the middle-income trap, Kang and Paus (2020) favor an integrated approach based on a ‘political economy of development’ This perspective adopts a common set of assumptions: a) domestic productive capacities are fundamental for the development of innovations with a greater impact on productivity growth; b) the interaction between domestic and international factors changes over time and can reinforce the challenges for strengthening domestic innovative capacity; and c) the relations between the government and the private sector play a critical role in the development of domestic innovation capabilities. In non-self-organizing systems, the reaction to those shocks tends to be more random, reinforcing instability Linking these properties of complex systems to the discussion of the development problem, it is possible to argue that the "middle income trap" is not necessarily related to stagnation, but to a random trajectory of a non-self-organizing nature that results in difficulties to cope with and accommodate shocks from different origins

Reassessing the trap: complexity system analysis and the Hurst Exponent

Maddison’s per capita income data

Random walks versus auto-correlated trajectories: the Hurst exponent

The Economic background for industrial revolution

Conclusion