First Advisor
Birol Yesilada
Term of Graduation
January 2026
Date of Publication
9-1-2026
Document Type
Dissertation
Language
English
Subjects
Economic growth, Middle-income trap, Political capacity, Productive upgrading, Structural transformation
Physical Description
1 online resource ( pages)
Abstract
The middle-income trap literature has examined why relatively few middle-income countries transition to high-income status. A range of explanations has been proposed, but the political dimension has often been overlooked. Studies that take a political perspective often focus on institutional form rather than the state’s ability to effectively implement policy. This study addresses this gap by bringing political capacity to the center of the analysis. It argues that political capacity appears important for the productive upgrading required for sustained growth in middle-income economies and shapes economic growth trajectories across countries at different income levels.The empirical analysis uses country-period panel data and two-way fixed-effects models to examine the relationship between Absolute Political Capacity (APC) and long-run economic growth across countries. The results show a systematically different nonlinear pattern across income groups. In middle-income countries, the relationship follows a U-shaped pattern. This means that political capacity translates into limited effects on growth at lower levels of APC and increasingly positive effects beyond an estimated threshold. This suggests that a minimum level of political capacity may be important to manage the complexities of structural transformation. In contrast, non-middle-income countries display an inverted-U relationship, indicating diminishing marginal returns to political capacity at higher levels. These findings suggest that political capacity in middle-income countries appears to become more growth-enhancing after a minimum threshold is reached, consistent with theoretical arguments linking political capacity to structural transformation. The study contributes to the development literature by providing new empirical evidence on how political capacity shapes growth trajectories in middle-income economies.
Rights
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Recommended Citation
Duvidovich, Gabriel, "Trapped in Transition: Structural Change and Political Dynamics in Middle-Income Countries" (2026). Dissertations and Theses. Paper 7194.