Cheng Li

About Cheng Li

Cheng Li is an associate professor at the Institute of Economics, Chinese Academy of Social Sciences, and a research Fellow at National Institution for Finance and Development, China.
Author Archive | Cheng Li
Economics, Finance sector development, Poverty

Distortions, growth catch-up, and the middle-income trap

Distortions, growth catch-up, and the middle-income trap
In theory, a distortion refers to a departure from the perfect competitive equilibrium with no externalities and in which resources have been optimally allocated so that each economic agent maximizes his or her own welfare. Thus, distortions are closely associated with market imperfections. In reality, an economy with no distortions does not exist—both advanced and developing economies use government interventions, such as stabilization policies, development strategies, industrial policies, administrative regulations, and so forth, which can be viewed as distortions, broadly defined.