POVERTY THE WORLD BANK REDUCTION AND ECONOMIC MANAGEMENT NETWORK (PREM) Economic Premise JUN 2012 NOVEMBER 010 • Numbe 98 • Number 18 73792 Avoiding Middle-Income Growth Traps Pierre-Richard Agénor, Otaviano Canuto, and Michael Jelenic Since the 1950s, rapid growth has allowed a significant number of countries to reach middle-income status; yet, very few have made the additional leap needed to become high-income economies. Rather, many developing countries have become caught in what has been called a middle-income trap, characterized by a sharp deceleration in growth and in the pace of productivity increases. Drawing on the findings of a recently released working paper (Agénor and Canuto 2012), as well as a growing body of research on growth slowdowns, this note provides an analytical characterization of “middle- income traps� as stable, low-growth economic equilibria where talent is misallocated and innovation stagnates. To counteract middle-income traps, there are a number of public policies that governments can pursue, such as improving access to advanced infrastructure, enhancing the protection of property rights, and reforming labor markets to reduce rigidities—all implemented within a context where technological learning and research and development (R&D) are central to enhancing innovation. Such policies not only explain why some economies—particularly in East Asia—were able to avoid the middle-income trap, but are also instructive for other developing countries seeking to move up the income ladder and reach high-income status. Middle-Income Traps Past and Present there ever since. In Latin America, for instance, income per capita relative to the United States fell almost continuously In the postwar era, many countries have managed to fairly rap- from 1960 to 2005, especially after the debt crises of the early idly reach middle-income status, but few have gone on to be- 1980s (figure 2). Likewise, economic growth in many Middle come high-income economies.1 Rather, after an initial period Eastern and North African countries has waned and given of rapid ascent, many countries have experienced a sharp way to high unemployment, as evidenced most recently by slowdown in growth and productivity, falling into what has been called a “middle-income trap.� To be sure, the World the social and political upheavals that took place during the Bank (2012) estimates that of 101 middle-income economies Arab Spring of 2011. in 1960, only 13 became high income by 2008—Equatorial Becoming Stuck in the Middle Guinea, Greece, Hong Kong SAR (China), Ireland, Israel, Ja- pan, Mauritius, Portugal, Puerto Rico, the Republic of Korea, Formal evidence on growth slowdowns2 and middle-income Singapore, Spain, and Taiwan, China (figure 1). traps has suggested that at per capita incomes of about By contrast, although many countries in Latin America US$16,700 in 2005 constant international prices, the growth and the Middle East reached middle-income status as early as rate of per capita gross domestic product (GDP) typically the 1960s and 1970s, a great majority of them have remained slows from 5.6 to 2.1 percent, or by an average of 3.5 percent- 1 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK    www.worldbank.org/economicpremise Figure 1. Per Capita Incomes Relative to the United States, 1960 and 2008 decreasing marginal returns to investment in phys- Hong Kong SAR, China ical capital, as a simple neoclassical growth model 6 Portugal Ireland would suggest. Singapore Spain Taiwan, China Japan A common explanation of growth slowdowns 5 Mauritius middle-income to staying is based on a Lewis-type development process (Ca- 2008 per capita income relative to Israel Equatorial high-income rich Guinea nuto 2011; Eichengreen, Park, and Shin 2011; and United States (log of %) Korea, World Bank 2012). In that perspective, factors and 4 Greece Rep. of advantages that generate high growth during an ini- from low tial phase of rapid development disappear when 3 China Puerto Rico income middle- and upper-middle-income levels are to middle income reached, thereby requiring new sources of growth to 2 middle-income maintain sustained increases in per capita income. trap During an initial phase of development, low- low-income income countries can compete in international 1 trap becoming markets by producing labor-intensive, low-cost poor products using technologies imported from 0 abroad. These countries can achieve large produc- 1 2 3 4 5 6 tivity gains initially through a reallocation of labor 1960 per capita income relative to United States (log of %) from the low-productivity agricultural sectors to Source: World Bank 2012. high-productivity manufacturing sectors—or to modern services. However, once these countries age points. Using regression and standard growth accounting reach middle-income levels, the pool of underemployed rural techniques, this analysis (Eichengreen, Park, and Shin 2011) workers drains and wages begin to rise, thereby eroding com- argues that growth slowdowns are essentially productivity petitiveness. Productivity growth from sectoral reallocation growth slowdowns, whereby 85 percent of the slowdown in and technology catch-up are eventually exhausted, while ris- the rate of output growth can be explained by a slowdown in ing wages make labor-intensive exports less competitive on the rate of total factor productivity growth—much more than world markets—precisely at the time when other low-income by any slowdown in physical capital accumulation. Therefore, countries become engaged in a phase of rapid growth. Accord- middle-income traps are not simply the natural implication of ingly, growth slowdowns coincide with the point in the Figure 2. Latin America: Per Capita Income Relative to the United States, 1960–2005 1.05 1.00 .95 .90 .85 .80 .75 .70 .65 .60 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 Source: IDB 2010. Note: Index, 1960 = 1. 2 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK    www.worldbank.org/economicpremise growth process where it is no longer possible to boost produc- production of final goods (or manufacturing), whereas only tivity by shifting additional workers from agriculture to in- those with advanced skills can work in the innovation sector dustry and where the gains from importing foreign technolo- (or, more generally, design activities). Because labor is rela- gy diminish significantly (figure 3). tively more productive in the design sector, an increase in the supply of workers with advanced skills is growth enhancing. An Overlapping Generations Perspective on Critically, this model also assumes that occupational choices Middle-Income Traps are endogenous; individuals choose to invest in education An alternative characterization of a middle-income trap has only if wages in the design sector are high enough, compared been developed in a recent working paper (Agénor and Ca- to manufacturing. Due to the combination of a knowledge nuto 2012).3 Although this analysis fundamentally agrees spillover and a learning-by-doing effect, the marginal produc- that productivity slowdowns are a major cause of middle-in- tivity gain associated with the stock of ideas is initially increas- come traps, it differs from the existing literature in terms of ing, which is particularly relevant for countries at low levels of the reasons why productivity growth may weaken and what development. type of public policies can help avoid such a slow-growth equi- Subsequently, the model considers two types of infra- librium. In particular, several factors may affect productivity structure: basic infrastructure, which consists of roads, elec- growth, including individual decisions to acquire skills, access tricity and basic telecommunications, and advanced infra- to different types of public infrastructure, and knowledge net- structure, which consists of advanced information and work externalities—which are defined as the possibility that a communication technologies (ICTs) in general, and high- higher share of workers with advanced levels of education has speed communications networks in particular. It is now well a positive impact on performance, that is, the ability to bene- established that access to broadband facilitates the buildup of fit from existing knowledge, of all workers engaged in innova- domestic and international knowledge networks and pro- tion activities.4 motes dissemination of information and research (see Canu- Using an overlapping generations (OLG) model that dis- to, Dutz, and Reis [2010]). Broadband networks also serve as tinguishes between two types of labor, basic and advanced, a tool that other sectors can leverage to develop previously this most recent analysis focuses on embodied human capital, untapped platforms (such as distance education and telemed- in which advanced skills are defined as specialized knowledge icine) and enable the development of digital content—all of that can be acquired by devoting a given amount of time to which can help promote innovation. Thus, while basic infra- higher education in early adulthood. In this model, individu- structure helps to promote the production of final goods, ad- als with either basic or advanced skills can both work in the vanced infrastructure is particularly important to promote Figure 3. Becoming Stuck in the Middle-Income Trap As economies move from low- to middle-income status, they can compete internationally by moving from agricultural to labor-intensive, low-cost manufactured products. Using imported technologies, late-developing economies reap productivity gains as workers shift from the agricultural sector to the manufacturing sector. Eventually, the pool of transferrable unskilled labor is exhausted, or the expansion of labor-absorbing activities peaks. As countries reach middle-income levels, real wages in urban manufacturing rise or market share is lost, and gains from importing foreign technology diminish. Productivity growth from sectoral reallocation and technology catch-up are eventually exhausted, international competitiveness is eroded, output and growth slow, and economies become trapped, unable to trancend to high-income status. Source: Authors’ illustration. 3 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK    www.worldbank.org/economicpremise design activities.5 Because labor supply decisions are endoge- Enforcement of property rights nously related to relative wages, there is a two-way interaction To create incentives for individuals and firms to engage in in- between these activities and the proportion of the population novation and design activities, the enforcement of patents is acquiring advanced skills. essential; however, in developing countries, this is often lack- The key extension of this model is that if the marginal ing. A poorly functioning system to administrate patents and benefits associated with nonrival (disembodied) knowledge enforce property rights may create a deadweight loss for the depend in a nonlinear fashion on the share of the population economy and make it more likely for countries to be caught in involved in design activities (being high for a range of values a middle-income trap. Conversely, improved enforcement of for that share), as a result of a knowledge network effect, then property rights enhances innovation and translates into high- multiple equilibria may emerge, one of them (the lower- er wages in the design sector, which would draw more high- growth equilibrium) being synonymous with middle-income ability workers into that sector. Consequently, it is more likely traps. This low-growth equilibrium is also characterized by a that the knowledge network externalities alluded to earlier misallocation of talent, because a number of individuals with would kick in and set the economy on a path to higher pro- high ability, who could be highly productive in research ac- ductivity and output growth. tivities, end up working in manufacturing and performing Labor market reforms more routine tasks. It is well recognized that labor market rigidities may discour- Avoiding the Middle-Income Trap and age hiring, which increases the likelihood of being caught in a Moving Up the Income Ladder middle-income trap. Suppose that the impact of labor market distortions—such as firing costs—on labor costs in the manu- Building on the model described above, there are a number of facturing and design sectors can be captured by a proportion- public policies that developing countries can employ to avoid al effect on the gross wage in each sector. If the distortion af- or escape from middle-income growth traps. Such measures fects both sectors in the same way, then the foregoing include developing advanced infrastructure in the form of discussion remains essentially the same, because what mat- high-speed communications networks, improving the en- ters for labor movements (the allocation of high-ability work- forcement of property rights through patent protections, and ers across sectors, which in turn affects productivity and out- reforming labor markets to ensure that rigidities do not pre- put growth) is the relative wage. vent the efficient firing and hiring of employees. Fundamen- However, it could be argued that some types of labor tally, these policies attract more high-ability workers into the market restrictions, especially those on firing costs, may be design sector, improve productivity and wages in that sector, particularly detrimental to design or innovation activities. and increase a country’s capacity for innovation. The reason is that in such activities, it is often more difficult Access to advanced infrastructure to observe the productivity of a worker before hiring—in con- Escaping from a middle-income trap may be achieved by a trast to routine tasks in manufacturing, where observability, sufficiently large increase in investment in advanced infra- both ex ante and ex post, is less costly. Thus, the risk of hiring structure, particularly in high-speed communications net- a worker who turns out to be a poor performer is higher in works. Intuitively, to benefit from existing ideas, there must activities where a college degree does not necessarily provide a be enough high-ability individuals involved in the design reliable signal about future performance. In such conditions, sector; but if productivity in that sector is low because of a the labor market distortion acts as a disincentive to seek high- lack of access to advanced infrastructure, wages will contin- er education—with adverse consequences for innovation and ue to be low—implying that few high-ability individuals will growth. By exacerbating the misallocation of talent, labor choose to invest in the advanced skills needed to operate in market distortions may make it more likely that the economy that sector. The availability of good-quality information and will end up in a lower-growth equilibrium. communications infrastructure play an important role in Broader Implications fostering innovation both by facilitating the cheap circula- tion of disembodied knowledge flows across and within na- Beyond the specific public policy issues discussed in the previ- tional borders as well as by reducing the transaction costs of ous section, there are several broader lessons that are useful in international trade and foreign investment. Thus, improving the context of the ongoing debate on how countries can avoid access to advanced infrastructure boosts productivity and falling into a middle-income growth trap, or more generally, wages in the design sector, which draws more labor and trig- transition from imitation to true innovation. gers the shift in labor supply that magnifies (at least tempo- First, it is necessary to consider the composition of the rarily) the benefit associated with exploiting the existing labor force during the development process. The common stock of ideas. view is that imitating available (imported) techniques is an 4 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK    www.worldbank.org/economicpremise easier task than true innovation. Thus, in the early stages of fective at promoting design activities and magnifying their development, when the main issue is to copy and adapt avail- impact on economic growth. able technologies, a relatively low level of skills, or specializa- Middle-Income Traps and the East Asian tion in basic technical skills, helps promote growth.6 At later Experience stages, however, true innovation requires more advanced skills, and in a wider range of areas. The shift from low-tech- As mentioned earlier, only 13 countries were able to transi- nology to more advanced activities then becomes the main tion from middle- to high-income status since the 1960s. Of vehicle for productivity change in an economy. Technological these countries, five were from East Asia—Hong Kong SAR learning spurs productivity growth and increases real wages, (China), Japan, Korea, Taiwan, China, and Singapore—four of which in turn cause firms to exit low-technology, labor-inten- which comprise the so called “Asian Tigers� of the late 20th sive activities and enter more capital-intensive, technological- century. Given their success, it is instructive to reflect on their ly sophisticated sectors. Because these sectors have stronger experience to draw lessons for other middle-income countries learning effects, and possibly more spillovers to the rest of the seeking to move into high-income status. Interestingly, many economy in terms of skills development and knowledge, of the public policies highlighted above—as well as a larger growth is further strengthened. framework for innovation based on technological learning Underpinning this transition from imitation to innova- and public sector support of R&D investments—can be ex- tion is the productivity of labor in the design sector. In an trapolated from the East Asian success story. The best prac- imitation trap, productivity and wages are relatively low in tices of these countries are particularly valuable for high- that sector, thereby mitigating incentives to invest in higher growth emerging markets, such as China and other large education. In turn, the lack of highly educated workers con- middle-income countries, which are already showing signs of strains production in design activities and prevents the ex- slowing. ploitation of externalities associated with knowledge net- First, of the East Asian economies that were able to es- works. In this sense, there is a two-way causality between cape the middle-income trap, all have succeeded in develop- education and innovation. Countries may remain caught in a ing advanced infrastructure networks, particularly in the low or moderate growth equilibrium because they are unable form of high-speed communications and broadband technol- to get enough high potential workers into innovation activi- ogy. Due equally to the liberalization of telecommunications ties; and because wages are low as a result, a fewer number of networks and related regulatory framework reforms, a num- individuals with high potential are willing to make the invest- ber of countries in the region have been able to develop and ment necessary to acquire the skills needed to be employed in enhance the availability of information and communications the innovation sector. The composition of the labor force de- services (Gill and Kharas 2007). To be sure, previous research pends, therefore, on the interaction between supply and de- on regional competitiveness underscores the importance of mand factors, and this explains why, as noted earlier, a mid- broadband telecommunications technologies and interactive dle-income growth trap is also often characterized by a multimedia. For countries with large export-oriented infor- misallocation of talent. mation equipment industries, such as Japan, Korea, and Tai- Second, the idea that market failures lead to underin- wan, China, a drive to enhance international competitiveness vestment in research has long been the principal rationale perpetuated the development of broadband and multimedia for government funding of R&D (OECD 2010). However, industries in domestic markets. Likewise, other economies in the presence of bottlenecks or other failures that impede in- the region that were able to escape the middle-income trap, novation activities can constitute equally crucial (if not more such as Singapore and Hong Kong (China), developed their important) obstacles to these activities. In particular, the advanced infrastructure networks to enhance their role as re- foregoing analysis argued that the lack of advanced infra- gional headquarters for major foreign multimedia companies structure, which may be especially productive in the design (Langdale 1997). sector (in part because it promotes knowledge networks), Another key factor underlying the success of the East plays a critical role in helping a country escape from a lower- Asian economies that were able to transition from middle- growth trap, not only because of its direct effect on produc- to high-income status was their ability to push the techno- tivity, but also because of its effect on the supply of high- logical frontier and move from imitating and importing for- skilled labor. In turn, a growing skill base facilitates a shift in eign technologies to innovating technologies of their own. production from labor-intensive to skill-intensive activities Strong intellectual property rights’ protections have been a and an increase in the pace of innovation. Somewhat para- major factor in facilitating this home-grown innovation. Ac- doxically, a reallocation of (limited) government resources cording to the World Bank’s Doing Business Database,7 intel- from direct subsidies to research and innovation activities, lectual property rights in economies such as Hong Kong toward the provision of advanced infrastructure, can be ef- SAR (China), Korea, Singapore, and Taiwan, China, rival 5 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK    www.worldbank.org/economicpremise Figure 4. Patents in East Asia 40 United States 35 30 Japan patents per 100,000 people 25 20 regression relation between Hong Kong SAR, China patents and per capita income 15 Singapore Korea, Rep. of 10 5 0 8.9 9.4 9.9 10.4 10.9 GDP per capita (log) Source: U.S. Patent and Trademark Office and World Bank estimates; Gill and Kharas 2007. those in place in Japan, the United States, and other high- port costs and lowering international trade barriers (Canuto income countries. 2011). This labor market flexibility has facilitated the new As a result of a well-functioning system of intellectual labor transition, now increasingly toward innovative occupa- property rights’ protections, many countries in the region tions. have become global leaders in patenting their own technolo- Conclusion gies. Using the number of patents issued by the United States Patent and Trademark Office as a measure, economies in the The features of East Asia’s experience in transitioning from region have generated patents at around the same rate as the middle- to high-income status provide important lessons for advanced economies (figure 4). In particular, Taiwan, China, other countries that are attempting to follow suit. The mid- now generates nearly as many patents as the best-performing dle-income trap is not an ineluctable outcome; it can be avoid- developed economies, such as Japan and the United States, ed if governments act early—rather than late, when the bene- with Hong Kong SAR (China), Korea, and Singapore not far fits of cheap labor and the gains from imitating foreign behind (Gill and Kharas 2007). Supporting this innovation technology are all exhausted—and decisively to promote inno- has been a commitment to investments that promote upgrad- vation. Doing so requires timely implementation of public ing skills and direct public funds to R&D efforts. According policies aimed at improving access to advanced infrastruc- to the United Nations Educational, Scientific, and Cultural ture, enhancing the protection of property rights, and reform- Organization (UNESCO) database on R&D expenditures, ing labor markets. These policies are central to fostering tech- Korea, Singapore, and Taiwan, China, now devote resources nological learning, attracting talented individuals into R&D to R&D spending comparable to levels in the United States activities, and encouraging the buildup of national and inter- and other highly innovative developed economies (Gill and national knowledge networks. Kharas 2007). About the Authors Last, flexible labor markets and open economic policies have allowed for the reallocation of labor across sectors within Pierre-Richard Agénor is Hallsworth Professor of International the most successful economies in the region. Countries in the Macroeconomics and Development Economics at the University region have relied extensively on international trade to accel- of Manchester; Co-Director for the Centre for Growth and Busi- erate their labor transfer by inserting themselves into the la- ness Cycle Research; Research Fellow at the Kiel Institute of the bor-intensive segments of global value chains. Such a transfer World Economy; and Senior Fellow at the Foundation for Inter- was facilitated by advances in ICTs and by decreasing trans- national Development Study and Research. Otaviano Canuto is 6 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK    www.worldbank.org/economicpremise Vice President and Head of the Poverty Reduction and Economic 7. Doing Business Database, World Bank and International Management (PREM) Network at the World Bank. Michael Jele- Finance Corporation, http://www.doingbusiness.org/. nic is an Operations Analyst in the PREM Network of the World References Bank’s Africa Region. Agénor, Pierre-Richard, and Otaviano Canuto. 2012. “Middle- Notes Income Growth Traps.� World Bank Policy Research Working Paper 6210. 1. The term “middle-income trap� was apparently first used Canuto, Otaviano, Mark Dutz, and Jose Guilherme Reis. 2010. by Gill and Kharas (2007); see also Commission on Growth “Technological Learning and Innovation: Climbing a Tall Lad- and Development (2008). “Middle-income economies� are der.� In The Day After Tomorrow: A Handbook on the Future of defined in accordance with the World Bank’s classifications Economic Policies in the Developing World, ed. O. Canuto and M. by income group, as given by http://data.worldbank.org/ Giugale, 51–66. Washington, DC: World Bank. about/country-classifications. Canuto, Otaviano. 2011. Navigating the Road to Riches. www. 2. The authors define a growth slowdown based on three con- project-syndicate.org. Canuto, Otaviano. 2012. Harnessing Trade Opportunities for Growth ditions: the first requires that prior to the slowdown, the sev- and Development. Capital Finance International. en-year average growth rate is 3.5 percent per annum or great- Commission on Growth and Development. 2008. The Growth er. The second condition identifies a growth slowdown with a Report: Strategies for Sustained Growth and Inclusive Development. decline in the seven-year average growth rate by at least 2 per- Washington, DC: World Bank. centage points. The third condition limits slowdowns to cases Eeckhout, Jan, and Boyan Jovanovic. 2012. “Occupational Choice in which per capita GDP is greater than US$10,000 in 2005 and Development.� Journal of Economic Theory 147: 657–83. constant prices—thereby ruling out episodes related to coun- Eichengreen, Barry, Donghyun Park, and Kwanho Shin. 2011. tries that have not yet successfully developed. “When Fast Economies Slow Down: International Evidence and Implications for China.� Working Paper No. 16919, National 3. Another view of the middle-income trap, which also focus- Bureau of Economic Research, Cambridge, MA. es on occupational choices in a globalized world, is developed Gill, Indermit, Homi Kharas, with Deepak Bhattasali et al. 2007. in Eeckhout and Jovanovic (2012). An East Asian Renaissance: Ideas for Economic Growth. Washing- 4. Indirect evidence of the importance of (local) knowledge ton, DC: World Bank. networks is provided by Weinberg (2011), who found that IDB (Inter-American Development Bank). 2010. The Aftermath of per capita GDP in developing countries is positively related to the Global Crisis. Washington, DC: IDB Publications. the number of important scientists born in and staying in a Langdale, John. 1997. “International Competitiveness in East Asia: Broadband Telecommunications and In- country. teractive Media.� Telecommunications Policy 21 (3): 5. Of course, all production sectors (not only design activities) 235–49. http://econpapers.repec.org/article/eeetelpol/ may benefit from advanced infrastructure. For instance, it is v_3a21_3ay_3a1997_3ai_3a3_3ap_3a235-249.htm. well documented that in recent years ICTs have helped inte- OECD (Organisation for Economic Co-operation and Develop- grate supply chains both within and across borders, thereby ment). 2010. The OECD Innovation Strategy: Getting a Head boosting efficiency in the production of manufactured goods Start on Tomorrow. Paris. (Canuto 2012). However, this does not affect the logic of this UNIDO (United Nations Industrial Development Organization). 2009. Industrial Development Report 2009: Breaking In and argument. Moving Up; New Industrial Challenges for the Bottom Billion and 6. Imitation activities may take the form of task-based pro- the Middle-Income Countries. http://www.unido.org/fileadmin/ duction, that is, specialization in some stage of a value chain user_media/Publications/IDR_2009_print.PDF. rather than in final products. However, task-based production U.S. Chamber of Commerce. 2012. China’s Drive for Indigenous may reinforce a country’s specialization in low-technology, Innovation. Washington, DC: APCO Worldwide. less sophisticated activities—which can be viewed as another Weinberg, Bruce A. 2011. “Developing Science: Scientific Perfor- form of a middle-income trap, that is, an “imitation trap.� The mance and Brain Drains in the Developing World.� Journal of Development Economics 95 (May): 95–104. United Nations Industrial Development Organization (UNI- World Bank. 2012. China 2030: Building a Modern, Harmonious, DO 2009) compared the sophistication of product- and task- and Creative High-Income Society. Washington, DC. based manufacturing and found no evidence that task-based WIPO (World Intellectual Property Organization). 2011. World production is less technologically sophisticated than produc- Intellectual Property Report: The Changing Face of Innovation. tion of final products. WIPO Publication No. 944E, Geneva. The Economic Premise note series is intended to summarize good practices and key policy findings on topics related to economic policy. They are produced by the Poverty Reduction and Economic Management (PREM) Network Vice-Presidency of the World Bank. The views expressed here are those of the authors and do not necessarily reflect those of the World Bank. The notes are available at: www.worldbank.org/economicpremise. 7 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK    www.worldbank.org/economicpremise