According to the World Bank, 13 out of 101 middle-income countries in 1960, had become high-income countries in 2008. Many countries were stuck in what is called the Middle Income Trap (MIT). The Asian Development Bank defines MIT as "the phenomenon where rapidly growing economies stagnate at middle-income level and fail to transition into high-income economies" In Asia, countries like China, Thailand and Malaysia developed from low-income levels to middle-income levels leveraging low cost labor and labor-intensive industrialization. However, they could no longer compete globally in labor-intensive goods as wages were rising. In addition, they could not compete in high value-added activities due to lower productivity. On the other hand, countries like South Korea and Taiwan were able to shift their growth trajectory to high-income levels with skill formation, export diversification, technology and innovation.

The research objective of the paper is to study the demographic and economic factors that help or hinder a country's ability to escape MIT. Some of the research questions addressed are- what policy lessons can we learn from the successful experiences of South Korea and Taiwan? Can middle-income countries replicate the successful models used by South Korea and Taiwan?

A few studies have explored the factors that would help countries escape the trap. However, the results are mixed and the evidence is inconclusive. Aiyar (2013) concluded that demographic factors, trade structure, infrastructure, institutional factors and macroeconomic environment are among the factors determining the MIT. While Tho (2013) emphasized the role of R & D, Yiping (2014) included financial liberalization as an important determinant of MIT. Kohli (2013), Egawa (2013) emphasized the role of income distribution.

In this paper, for the five countries (South Korea, Taiwan, Thailand, Malaysia and China), data (2000-2017) will be collected on variables such as old age dependency ratio, exports/GDP, Gini coefficient, R&D expenditures, M2/GDP, and shares of agriculture and industry. The main data sources are the World Development Indicators, UNESCO, IMF and country-specific government agencies. A link between growth and income inequality will be explored in the context of the Kuznets hypothesis. Ordinary least squares along with qualitative analysis will be used. A comparative study of South Korea and Taiwan with the other countries will shed light on the gaps and policy measures that governments can take to escape the MIT. We expect high-value added exports, reduced inequalities, increased R & D expenditures, and financial liberalization will help countries escape the MIT.