Not in a Trap But Where on the Road? The Welfare Trap Dilemma in Türkiye and the European Union

This study examines the validity of the middle-income trap (MIT) phenomenon in countries, specifically in the European Union and Türkiye, using series from 1990 to 2024. In this context, the United States (US) was selected as the reference country within the theoretical framework of the convergence hypothesis. Econometric analyses were performed using traditional unit root tests (ADF, PP, KPSS), structural break unit root tests Kapetanios, Gomez-Zaldivar and Fourier ADF (FADF) tests with bootstrap (1000) critical values. According to the results obtained in the study, traditional unit root tests revealed non-stationary unit roots in the vast majority of Türkiye and EU countries. This indicates that income differences are permanent in nature compared to the US. In structural break tests, despite level and trend breaks as endogenous variables, similar results to traditional unit root tests were obtained, with only a limited number of countries showing evidence of stationarity. In the FADF test applied with 1000 bootstrap repetitions, stronger rejections of the unit root hypotheses were obtained. The majority of these rejection decisions occurred in trend-based equations and were found to be inconsistent with the MIT definition. According to the final results, Sweden and Finland were found to be stationary in the fixed equation and were interpreted as converging to a stable level relative to the US. Jel Codes: 047, 040, F43, 057, J01