The term “middle-income trap” refers to the tendency of fast-growing developing economies to lose momentum well before they achieve high-income status. First introduced by World Bank economist Indermit Gill and the Brookings Institution’s Homi Kharas in 2007, the concept has since become the subject of intense debate among economists.While some scholars have questioned the existence of this trap, it is undeniable that many middle-income countries have struggled to join the ranks of the advanced economies. A 2013 World Bank study found that just 13 out of 101 middle-income economies have managed to make the leap between 1960 and 2008. Among these were Japan, the four “Asian tigers” – Hong Kong, Singapore, South Korea, and Taiwan – as well as peripheral European economies such as Spain, Greece, and Portugal.In August, the World Bank’s annual World Development Report reignited the debate. Surprisingly, the report identified 34 economies that escaped the middle-income trap and achieved high-income status between 1990 and 2022. This expanded group includes Latin American countries such as Chile and Uruguay, Central and Eastern European countries like Poland and Romania, the three Baltic states, and Gulf countries like Saudi Arabia and Oman.The updated list raises a fundamental question: Has escaping the middle-income trap become easier, or was it always easier than previously thought – perhaps never existing at all? The answer is far from simple, as the criteria for determining economies’ development status have shifted over the past few decades, with the high-income threshold gradually lowered.This year, for example, the World Bank defined a high-income country as one with a gross national income exceeding $13,845 per capita – roughly 20% of the United States’ GNI. This marks a decline from the 2012 bar, which was set at 24% of US levels, or the 1990 threshold of $7,620, equivalent to 30% of America’s GNI at the time. These shifting criteria help explain why earlier reports classified fewer countries as high-income.Classifying a country with a GNI equivalent to one-fifth that of the US as high-income underscores the flaws in the World Bank’s approach, which fails to account for prices and purchasing power – indicators that more accurately reflect actual living standards.Malaysia is a case in point. In 2023, its GDP per capita (in current dollars) was $12,570, falling short of the high-income threshold. Yet, when adjusted for purchasing power parity, its GDP per capita was 45.5% of US levels, reflecting significantly higher living standards. By contrast, Chile is classified as a high-income economy, with a GDP per capita of $16,816 in 2023. But Chile’s PPP-adjusted income was just 36% of America’s.In other words, PPP-based figures offer a more reliable measure of real living standards. Under the current system, Malaysia remains a middle-income country despite having higher living standards than Chile. Similarly, Turkiye, with a GDP per capita just below $16,000 (in current dollars), is classified as middle-income, even though its PPP-adjusted GDP per capita is 51% of US levels.Moreover, PPP figures paint a decidedly less optimistic picture of economic performance than the World Bank report suggests. For example, my calculations – based on data from the International Monetary Fund’s 2024 World Economic Outlook – show that although Mexico is a member of the OECD, its income gap with the US has widened since the North American Free Trade Agreement came into effect in the mid-1990s. Its PPP-adjusted GDP per capita fell from 35% of America’s in the early 2010s to 30% in 2023.Brazil and South Africa have followed a similar trajectory. Brazil’s PPP-adjusted GDP per capita stood at 24% of US levels in 2000, rose to nearly 30% in 2013, but then declined to less than 25% in 2023. Similarly, South Africa’s GDP per capita increased in PPP terms from 22% of US levels in 2000 to 25% around 2010, only to drop below 20% in 2023.To be sure, Asian economies have generally outperformed those of Latin America. South Korea’s PPP-adjusted GDP per capita, for example, grew from 30% of US levels in the mid-1980s to 73% in 2023, overtaking Japan, whose GDP per capita now stands at 63% of America’s. Meanwhile, Indonesia has doubled its income relative to the US over the past two decades, rising from around 10% of US levels in 2000 to roughly 20% in 2023 without any significant setback.But despite decades of progress, many middle-income countries still struggle to catch up to advanced economies, a reality often obscured by the practice of lowering the high-income threshold. The World Bank should reconsider its approach, in particular by moving from nominal GDP to PPP-based income figures that better reflect current living standards. Such an adjustment would offer a fairer, more reliable measure of economic development. — Project SyndicateKeun Lee, a former vice-chair of the National Economic Advisory Council for the President of South Korea, is Distinguished Professor of Economics at Seoul National University, a fellow at CIFAR, an editor at Research Policy, and the author, most recently, of Innovation-Development Detours for Latecomers: Managing Global-Local Interfaces in the De-Globalization Era (Cambridge University Press, 2024).