Wagner Murilo Pereira Takata

The slow growth of Brazil and other Latin American countries in the years 2010s have been addressed in the economic literature and many authors defend the existence of middle-income trap (MIT) in these countries. This paper has used the different literature approaches to verify if Brazil and other countries selected from Latin America (Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay, and Venezuela) are in this trap and which factors could help these countries to escape to superior levels of income. As the literature indicates the following potential factors that are responsible for a country to escape or to become trapped in the MIT: human capital, physical capital, total factor productivity, commercial openness, and government expenditure, which are denominated triggering factors, the first objective of this paper was to verify if there is a long-term relationship between these variables and the Brazilian per capita GDP using Johansen (1988) cointegration analysis. The second and main objective of this research was to estimate a probit model to verify the probability of these factors to help the countries to escape the MIT through the identification of how the triggering factors affect per capita GDP growth slowdowns. The analysis for Brazil starts in 1954 and ends in 2019 and begins in 1955 to 2019 for the Latin American countries. The results indicate that human capital, productivity, and government spending have a positive impact in Brazil’s per capita GDP. In the case of the probit panel, an increase in productivity and an undervalued exchange rate increases the probability of these countries to escape the MIT. This provide evidence that would be possible for these countries to escape the MIT if they create public policies to improve these indicators.