MALAYSIA IN MIDDLE-INCOME TRAP: CAN INNOVATION HELP TO OVERCOME IT?
Wan Farisan Wan Sulaiman, PhD
Ismaily Johari
Muhammad Harunurashid
DOI:
Keywords:
Malaysia’s Economic Development, Middle-Income Trap, Total Factor Productivity, Innovation, Autoregressive Distributed Lag
Abstract
The middle-income trap refers to a situation where a country remains unable to transition its income per capita from a middle-income level to a high-income level over an extended period. A primary case in point is Malaysia, which has struggled to escape this trap for decades despite implementing various economic models and plans. Key contributing factors include the deceleration of economic growth following the 1997 Asian Financial Crisis and the 2008 Global Economic Crisis. Notwithstanding these setbacks, Malaysia continues its efforts to achieve high-income nation status by emphasizing enhanced innovation and increased productivity. This article surveys the literature on the middle-income trap and innovation while using the Autoregressive Distributed Lag (ARDL) approach to identify the impact of innovation on Malaysia's economic growth. The findings suggest that policymakers should focus on strengthening the private sector and improving education to boost innovation and productivity, ultimately helping Malaysia achieve high-income status and realize its Shared Prosperity Vision 2030.
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