Middle Income Trap and the Export Sophistication: The Case of MENA Countries with Reference to Korea

The globalization promotes specialization according to comparative advantage. The ability to shift nation’s comparative advantage in a globalized environment is an important key factor for middle income trapped countries. While the comparative advantage of resource-abundant countries such as Algeria, Saudi Arabia remains a given endowment factor, Korea managed to shift its comparative advantage from labor abundant to capital abundant. In order to understand the reasons of success and failure of economies, the competitiveness in international trade was examined. Historical changes in export structures using the Net Export Ratio were studied to determine whether countries’ industrial upgrading of exported goods follows a smooth transition. This study’s finding is that for trapped countries, the patterns of exporting mainly were concentrated at the primary goods and this narrow industrial base is thus a possible cause of the MIT. This trend has intensified during the period of 1995-2015 when free trade environment was dominant. As for Korea, the industrial upgrading process appears to be consistent with the “flying-geese model” indicating that the industrial upgrading process passed through the backward linkage from consumption goods to capital goods.