The Leap of the Tiger : How Malaysia Can Escape the Middle-Income Trap

Only a few European economies and Korea and Taiwan Province of China reached high-incomestatus during 1970-2010. Malaysia's real income per capita increased to 26 percent ofthe U.S. level in 2010 from 20 percent in 1970. Despite relatively strong growth and asubstantial improvement in export sophistication, Malaysia's total factor productivity laggedbehind that of Korea and Taiwan Province of China. We argue that what characterizes theirexperience in contrast to Malaysia's is the creation of technologies by domestic firms and apush to leapfrog to the technological frontier at an early stage of development.