Income Traps for Different Income Groups: An Empirical Investigation

Abstract

This study investigates the existence of income traps for 42 countries with different income levels. These income traps were investigated by employing the Augmented Dickey-Fuller, Zivot-Andrews with one break, and Lee-Strazicich with two breaks test procedures for the 1987-2019 period. The empirical findings reveal the existence of income traps at lower-middle, upper-middle, and lower-high-income levels. The study points out the possibility of a new income trap for countries that have just passed the income threshold that separates upper-middle and high-income countries.