Modelling Factors Affecting the Middle Income Trap in Indonesia Using Generalized Additive Models (GAM)

Indonesia is currently facing a significant challenge known as the Middle Income Trap (MIT), a condition where economic growth stagnates after reaching middle-income status, hindering progress toward becoming a high-income country. This study aims to identify and model the socio-economic factors influencing MIT at the provincial level in Indonesia during the 2020–2023 period. The Generalized Additive Model (GAM) is employed to estimate nonlinear relationships between predictors and the response variable while capturing complex patterns in panel data. GRDP per capita is used as an indicator of MIT, with six predictor variables: life expectancy, poverty rate, informal employment share, secondary education completion rate, food insecurity prevalence, and population density. The results showed that the best model was obtained based on the minimum GCV and AIC values of the Gaussian family with an identity link function and 5 knot points with the highest correlation of 99,9%. Five variables show nonlinear effects, while food insecurity exhibits a significant negative linear impact. The findings provide a valuable reference for designing inclusive and adaptive eco nomic policies based on each region’s socio-economic characteristics to mitigate MIT risks and also supports the achievement of Sustainable Development Goal (SDG) 8, which promotes decent work and sustained economic growth.