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This paper compares and contrasts the policy reform experiences of Poland and Turkey en route to high income. For both countries, globalization has presented unprecedented opportunities to catch up, unleased by integration into European and global markets and the establishment of macroeconomic discipline. These opportunities were reinforced by the creation of economic institutions to strengthen competition and support private entrepreneurship, catalyzed by the convergence process with the European Union. Both Poland and Turkey have shown resilience following the 2008 global crisis, but continued success will require renewed structural reform measures. Dealing with the challenging of aging while at the same time finding a way to sustain productivity growth through greater domestic innovation is shaping Poland’s policy agenda. Turkey's structural and demographic potential as well as its strategic location between the markets of Europe and Asia offers attractive value proposition to investors, which could be further enhanced with improvements in business regulations and economic governance.

Given that latecomer firms and economies are “resource-poor late entrants,” they require not only “capability building,” but also “smart specialization” in a sector where they can receive better growth prospects and may survive by competing effectively with the incumbents. This chapter proposes the cycle time of technologies as a criterion for smart specialization. This criterion is arguably better than other criteria that are based on product spaces, and complements the latent comparative advantage idea of Lin (Lin J.Y., 2012. New Structural Economics: A Framework for Rethinking Development and Policy. World Bank Publications, Washington DC.). Qualified middle-income countries have comparative advantages in sectors with a short-cycle time because short-cycle technologies imply that the dominance of the incumbent is often disrupted and new technologies tend to emerge. This study also proposes several strategies for implementing this criterion; essentially, public interventions should avoid not only targeting, but also design failures by involving private firms from the beginning.

This chapter provides a review of China’s economic growth since 1978. Studying China’s economic success may shed new light on the political economy of growth, the impacts of the ascent of large countries on the rest of the world, and the relationship between inequality and economic growth. The chapter starts with a review of the characteristics of China’s economic growth and compares it with those of several similar economies. Then it shows how China’s economic success has been created by innovative institutional arrangements as well as adherence to the policy advice prescribed by neoclassical economics. After that, the chapter describes China’s export-led growth model and analyzes its causes and the structural imbalances associated with it. Lastly, the chapter presents data for income inequality in China and discusses how inequality may affect China’s prospect of avoiding the middle-income trap.