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Indian gross domestic product per capita increased rapidly between 2001 and 2006 in a climate of increasing services trade, with the export-oriented services sector responsible for rising shares of growth in gross domestic product. Due to its contribution to aggregate economic growth, there is a great need for empirical examination of the distributional consequences of this growth, especially in light of the challenges in obtaining theoretical solutions that can be generalized. This paper fills this gap in the literature by using a global simulation model to examine how sensitive factor incomes across different industries may have been to the historical changes in India's services exports and imports, and provides insight on the distribution of the national income growth attributable to the expansion of the services industry. Rent on capital in the service sector and wages of all workers would have increased as a result of greater services trade in this period, while income from capital specific to agriculture and manufacturing would have declined. The factors involved with the urban-based services sector may thus benefit from the services trade growth, while the total factor income involved in rural agriculture may decline.

Agriculture --- Economic Theory & Research --- Elasticity --- Elasticity of substitution --- Emerging Markets --- Equilibrium --- Exports --- GDP --- GDP per capita --- Gross domestic product --- Gross domestic product per capita --- Growth theories --- ICT Policy and Strategies --- Information and Communication Technologies --- International Economics and Trade --- Labor Policies --- Macroeconomics and Economic Growth --- National income --- Private Sector Development --- Product differentiation --- Production functions --- Real gdp --- Social Protections and Labor --- Statistical analyses --- Telecommunications --- Trade barriers --- Trade Policy --- Transactions costs --- Value added --- Wages

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December 1999 - The data strongly support the hypothesis that countries with more unequal distribution of factor income redistribute more in favor of the poor - even when the analysis controls for older people's share in total population (that is, for pension transfers). But the evidence on the median voter hypothesis is inconclusive even if middle-income groups gain more (or lose less) through redistribution in countries where initial (factor) income distribution is more unequal. The median voter hypothesis is important to endogenous growth theories because it provides the political mechanism through which voters in more unequal countries redistribute a greater proportion of income and thus (it is argued), by blunting incentives, reduce the country's growth rate. But the hypothesis was never properly tested because of lack of data on the distribution of (pre-tax and transfer) factor income across households, and hence on the exact amount of gain by the poorest quintile or poorest half. Milanovic tests the hypothesis using 79 observations drawn from household budget surveys from 24 democracies. The data strongly support the hypothesis that countries with more unequal distribution of factor income redistribute more in favor of the poor - even when the analysis controls for the older people's share in total population (that is, for pension transfers). The evidence on the median voter hypothesis is much weaker. Milanovic does find that middle-income groups gain more (or lose less) through redistribution in countries where initial (factor) income distribution is more unequal. This regularity evaporates, however, when pensions are dropped from social transfers and the focus is strictly on the more redistributive social transfers. This paper - a product of Poverty and Human Resources, Development Research Group - is part of a larger effort in the group to study the relationship between democracy and inequality. The study was funded in part by the Bank's Research Support Budget under the research project Democracy, Redistribution, and Inequality (RPO 683-01). Also published as "The median voter hypothesis, income inequality and income redistribution: An empirical test with the required data", European Journal of Political Economy , volume 16, No. 3, September 2000, pp. 367-410. The author may be contacted at bmilanovic@worldbank.org.

Consumption --- Disposable Income --- Economic Mechanism --- Economic Theory and Research --- Emerging Markets --- Endogenous Growth --- Factor Income --- Finance and Financial Sector Development --- Financial Literacy --- Fiscal and Monetary Policy --- Growth Rate --- Growth Theories --- Income --- Income Distribution --- Income Groups --- Income Inequality --- Inequality --- Investment and Investment Climate --- Labor Policies --- Macroeconomics and Economic Growth --- Mean Income --- Median Voter --- Median Voter Hypothesis --- Personal Income --- Personal Income Taxes --- Political Mechanism --- Poverty Impact Evaluation --- Poverty Reduction --- Private Sector Development --- Public Choice --- Public Sector Development --- Services and Transfers to Poor --- Significant Relationship --- Social Protections and Labor

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Since we introduced the term "middle-income trap" in 2006, it has become popular among policy makers and researchers. In May 2015, a search of Google Scholar returned more than 3,000 articles including the term and about 300 articles with the term in the title. This paper provides a (non-exhaustive) survey of this literature. The paper then discusses what, in retrospect, we missed when we coined the term. Today, based on developments in East Asia, Latin America, and Central Europe during the past decade, we would have paid more attention to demographic factors, entrepreneurship, and external institutional anchors. We would also make it clearer that to us, the term was as much the absence of a satisfactory theory that could inform development policy in middle-income economies as the articulation of a development phenomenon. Three-quarters of the people in the world now live in middle-income economies, but economists have yet to provide a reliable theory of growth to help policy makers navigate the transition from middle- to high-income status. Hybrids of the Solow-Swan and Lucas-Romer models are not unhelpful, but they are poor substitutes for a well-constructed growth framework.

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