Economic convergence refers to a period of rapid growth, typically between two developed countries, in which the poorest countries catch up to the richest. This phenomenon is also known as the catch-up effect. The poorer economies tend to grow faster than the rich ones in per capita income, because the Solow growth model predicts a rapid rise in the rate of output when physical capital per person is low.
As countries grow more prosperous, global GDP increases. However, the gap between rich and poor countries is growing. For example, low-income countries have higher growth rates than high-income ones, so that they have lower per capita incomes. On the other hand, middle-income countries like the United States, Canada, the European Union, Japan, and Australia have a much faster pace of GDP growth. This trend is a good thing for the poorer nations, as it will lead to lower poverty levels and higher wages for them.
Slow convergence occurs when the average income per worker of a country converges with the average income per worker of another country in the long run. The long-run trend of income per worker depends on the structural characteristics of a country, and foreign aid should be targeted at enhancing structural changes and limiting income transfers. The concept of club convergence is used to group countries with similar growth paths. For example, several countries with low national incomes experience relatively high rates of GDP growth, but they have lower initial GDP.
While the general trend of high and low income countries convergence is still possible, it will likely be slow. The average GDP per capita of a high-income country is now around $40k. By contrast, a low-income country has a GDP per capita of $4k. As a result, both countries are growing faster than the same number of high-income countries. And while the rich countries are catching up to the richer countries, the poorer ones are still lagging behind.
The concept of convergence is important in economics. It is a process where countries with similar structures grow at the same rate. This is also known as club convergence. The term is often used in the literature of economic growth. In this case, the idea of convergence is the same as the term for the process of globalization. For example, when a rich country grows more rapidly than a poor one, the latter becomes a poor country.
The concept of convergence is a fundamental principle of economic growth. As a result, it is a fundamental principle of economics. Generally, the higher the convergence, the more liquid the market. But this doesn’t mean that a low-income country will become richer overnight. The difference between a rich and poor country’s GDP is often measured in sigma-convergence.
In economics, converged economies are characterized by the same growth rate. In a country with a higher income, the poorer economy is expected to grow more rapidly than a rich one. This means that a low-income country will grow faster than a high-income country. While this is true, a middle-income country is unlikely to achieve that level of convergence, as it is likely to be poorer than a high-income nation.
The concept of convergence is a key concept in economics. It is the process of a country’s economy reaching the level of a high-income country. Historically, countries with higher GDP growth rates have been much more successful than low-income countries. But in the present, the trend towards convergence is a slow, gradual process. While the difference between high and low-income economies is large in the short run, the rich countries are likely to be much more prosperous than the poor countries in the future.
In economics, it is also a term that is used extensively in the literature. The term sigma-convergence refers to a decrease in income dispersion among countries, while beta-convergence means that the poor economies are growing faster than the rich. Economists use the term “convergence” to refer to the degree to which a market has grown. The more definite the convergence, the better.
In conclusion, convergence is a key concept in economics that has broad implications for understanding the global economy. There are many different factors that can cause convergence, and it can take many different forms. However, when it does occur, it is an important event that can have a significant impact on the global economy.