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How to avoid middle income traps ? evidence from Malaysia, Volume 1
Author:Flaaen, Aaron; Ghani, Ejaz; Mishra, Saurabh; Country:Malaysia;
Date Stored:2013/04/26Document Date:2013/04/01
Document Type:Policy Research Working PaperSubTopics:Economic Theory & Research; Emerging Markets; Banks & Banking Reform; Economic Conditions and Volatility; Labor Policies
Language:EnglishRegion:East Asia and Pacific
Report Number:WPS6427Collection Title:Policy Research working paper ; no. WPS 6427
Volume No:1  

Summary: Malaysia's structural transformation from low to middle income is a success story, making it one of the most prominent manufacturing exporters' in the world. However, like many other middle income economies, it is squeezed by the competition from low-wage economies on the one hand, and more innovative advanced economies on the other. What can Malaysia do? Does Malaysia need a new growth strategy? This paper emphasizes the need for broad structural transformation; that is, moving to higher productivity production in both goods and services. This paper examines productivity growth for Malaysia at the sectoral level, and constructs several measures of the sophistication of goods and services trade, and puts these comparisons in a global context. The results indicate that Malaysia has further opportunities for growth in the services sector in particular. Modernizing the services sector may provide a way out of the middle income trap, and serve as a source of growth for Malaysia into the future.

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