Chapter 2. Driving Forces of the Middle Income Trap in Peru and Comparative Overview of Relevant Indicators with China

Abstract

This chapter presents the driving forces of the middle income trap in Peru and its performance on relevant indicators of economic development relative to China as well other countries. We first compare Peru and China according to the source of economic growth. Second, we put emphasis on components of competitiveness of a country such as efficiency, innovation, institutions, infrastructure, macroeconomic stability, labor market, education, health among others; in addition, we compare Peru and China relative to other economies such as the US in such productivity components. Third, we compare the main drivers of both countries within a comparative analysis over time; for that we estimate an econometric growth model for 102 countries from 1960 to 2015; we find that for the last two decades the main driver for Peru has come from structural and macroeconomic stabilization policies, and for China from structural policies.