The catch-up model predicts that relatively poorer countries should grow more qu

Question

The catch-up model predicts that relatively poorer countries should grow more quickly than richer countries over time. 1 Write a paragraph explaining why this economic model would occur. 2 Have the predictions of the model been accurate? (Use an academic journal article to support your answer) 3. What are some reasons that countries might have failed to "catch-up" over time? (Utilize current laws politics, or economic conditions to explain.) (Use an academic journal article to support your answer.) 4. What, if anything, should those countries do differently in the future? (This can be a personal reflection based on the academic journal article information already analyzed.)

Explanation / Answer

The catch up model also known as the theory of convergence explains that poor or developing countries(low income countries would grow at a faster rate as compared to the developed countries or countries with a high per capita income. The low income countries would grow faster and reach high levels of per capita income over time to catch up with the developed nations.

There are various arguments which favour the theory of convergence. The theory is based on the logic that poor and developing nations(Low income countries) have much better opportunities for economic growth than the rich or developed ones. First argument is that these nations have access to advance technology from the developed world. Low income countries can easily apply new technologies to which has already been invented. Therefore, these countries countinously make technological progress.

The second argument is based on law of diminshing marginal returns. This law suggest that as economy continues to increase its physical and human capital , the marginal gains through these factors will diminish.So, marginal gains to economic growth will diminsh. Therefore, low income countries would have higher marginal effect of empolying labour and capital than high income countries.

But some countries have failed to operate under the law of convergence and are stuck in middle and low income trap as these nations continue to face barriers to technology spillover and appropriate allocation of resources.

Trade and FDI are the most important channels that determine the progress of an economy.Some of the nations that have failed to catch up include those who have not opened up their economies internationally. They don't invite any foriegn firms in their economy and hence don't have access to adavance technology which is being used by these foriegn firms. These low income countries continue to employ poor technology in production.

Another important factor is the quality of governance and political institutions in a country.If the government doesnot act in favour of economic growth, the low income countries alwys get stuck in low income trap, especially in case of bad political institutions such as dictatorship which continously hinders the economic progress. The rich class takes the wealth away from working class providing little incentive to achieve efficient production.

Apart from all these, there are other factors like skilled labour force , educational standards , infrastructure, R& D and investment which ultimately determines the economic progress of the nation. So, low income economies should open their economies by attracting FDI and trade.These nations should continue to focus upon governance,educational standards and infrastructure development in order to achieve high growth rate.

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