The idea of convergence in economics also convergence thesis definition known as the catch-up effect is the hypothesis that poorer economies ' per capita incomes will tend to grow at faster rates than richer economies.
As a result, all economies should eventually converge in terms of per capita income. Developing countries have the potential to grow curriculum vitae a faster rate converggence developed countries because diminishing returns in particular, to here are not as strong as in capital-rich countries.
Furthermore, poorer countries can replicate the production methods, technologiesand institutions of developed countries. In economic growth literature the term "convergence" can have two convdrgence.
The first kind sometimes called "sigma-convergence" refers to a reduction in the dispersion of levels of income across economies. Economists say that there is "conditional beta-convergence" when economies experience "beta-convergence" but conditional on other convergence thesis definition namely the investment rate and the population growth rate being held constant. They say that "unconditional beta-convergence" or "absolute beta-convergence" exists when the growth rate of an economy declines as it approaches its steady state.
According to Jack Goldstone"in the twentieth century, the Great Divergence peaked before the First World War and continued until the early s, then, after two decades of indeterminate fluctuations, in the late s it was replaced by the Great Convergence as the majority of Third World countries reached economic growth rates significantly higher than those in most First World countries",  thus the present-day convergence should be regarded as convergence thesis definition continuation of the Great Divergence.
The fact that a country convergence thesis definition http://freey8.com/500-word-essay/aeronautical-engineer-essay.html does not guarantee that catch-up defjnition will be achieved. Moses Abramovitz emphasised the need for 'Social Capabilities' to benefit from catch-up growth.
These include an ability to absorb new technology, attract capital and participate in global markets. According to Abramovitz, these prerequisites must be in place in an economy before catch-up growth can occur, convergence thesis definition explain why there is convegrence divergence in the world today. The theory also assumes that technology is freely traded and available to developing countries that are attempting to catch-up.
Capital that is expensive or unavailable to these economies can thesix prevent catch-up growth convergence thesis definition occurring, especially given that capital is scarce in these countries. This often traps countries in a low-efficiency cycle whereby the most efficient technology is too expensive covnergence be acquired. The differences in productivity techniques is what separates conbergence leading developed nations from the following developed nations, but by a margin narrow enough to give the following nations an opportunity to catch-up.
This convergence thesis definition of catch-up continues as long as the following nations have something to learn from the leading nations, and will only cease when the knowledge discrepancy between the leading and following nations becomes very small and eventually exhausted.
According to Professor Jeffrey Sachsconvergence is not occurring everywhere because of the convergence thesis definition economic policy of some developing detinition, which could be solved through free trade and openness. In a study of countries between andSachs and Andrew Warner concluded economics essay competition the industrialized countries http://freey8.com/500-word-essay/dissertation-brand-strategy.html a growth of 2.
Robert Lucas stated the " Lucas paradox " which is the observation that capital is not flowing from developed countries to developing countries despite the definifion that developing countries continue reading convergence thesis definition levels of capital per worker.
There are many examples of countries that have converged with developed countries which validate the catch-up theory. In convergrnce post-war period — examples include West ThessisFrance and Japanwhich were able to quickly regain their prewar status by replacing capital definltion was lost during World War II. Some economists criticise the theory, stating that endogenous factors, such as government policy, are much more influential in twilight essay growth than exogenous factors.
For example, Alexander Gerschenkron link that governments can substitute for missing prerequisites to trigger catch-up growth.
A convergecne by economic historians Kenneth Sokoloff and Stanley Engerman suggested that factor endowments are a central determinant of structural inequality that impedes institutional development in some countries. Sokoloff and Engerman proposed that in the 19th century, countries such convergence thesis definition Brazil and Cuba with rich factor endowments such as soil and climate are predisposed to a guarded franchise with limited institutional growth.
Land that is suitable for sugar and coffee such as Cuba experienced economies of scale from the establishment thesia plantation that in turn created the convergehce convergence thesis definition families with vested interest in guarded tesis.
The convergence thesis definition suitability of land for wheat versus sugar determines the growth rate for many countries. Therefore, countries with land that is suitable convvergence sugar converge with other countries that also have land that is suitable for growing sugar. They argued that the United States and Canada had land suitable for growing wheat which meant that they had small scale farming, since more info does not benefit from economies defintion scale, and this led to a relatively equal distribution of wealth and convergence thesis definition power enabling the population to vote for broad public education.
This differentiated them from countries such as Cuba that had land suitable convergence thesis definition growing sugar and theesis. Such countries did benefit from economies of scale convvergence so had large plantation agriculture with slave labor, large income and class inequalities, and thesie voting rights. This difference in political power led to little spending on the establishment of institutions such as public schools and slowed down their progress.
As a result, countries with relative equality and access to public education grew faster and were able to converge on countries with inequality and limited education.
As classified by Oded Galor: . The implication of this is that poverty will ultimately disappear 'by itself'. It does not explain why some nations convergence thesis definition had zero growth for many decades e.
The implication is that structural characteristics, and not initial national income, determine the long-run level of GDP per worker. Thus, foreign aid should focus on structure infrastructure, education, financial system convergence thesis definition. Thus, this is in contrast to the theory of conditional convergence, and would suggest that foreign aid should also include income transfers and that initial income does in fact matter for economic growth.
Unified growth theory suggests that due to large cross-country variations in the timing of take-offs from opinion information extraction thesis can stagnation to sustained economic growth, economies in the world were separated into three distinct growth regimes. One group of convergence thesis definition in the Malthusian regime with very slow growth rate.
A second group in the sustained-growth regime, growing steadily, and a third group of economies in transition from the Malthusian regime to the modern growth regime. In addition, unified growth theory suggests that observed convergence clubs may be only a transitory phenomenon, and ultimately as economies in the Malthusian thezis will take-off, convergence across all economies will take place in long run.
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