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? cu secure https:/ ng cengage constaticbdevoir det trideploymentid-5572591901581970653419542sseisaN·9781305650091&snaesi; MINDTAP Aplia Homeworkc Productivity and Growh 6. Convergence theory The folowing table shows real GDP per capita for the United States, Taiwan, and Uganda between 1970 and 2000. All figures are in 1998 Us. dollars Uganda Year Real GDP per Capita Growth Rate Real GOP per Capita Growth Rate Real OOP per Capita Growth Rate 1970$18,395 980 1990 $28,435 2000 2,319 4,483 $8,431 14,504 $190 $182 176 22,666 $34,770 Source: Organisation for Economic Cooperation and Development (OEco) the second column. For example, from 1970 to 1980, the United States GDP The (decade-long) economic growth rate for the United States is shown in grew fron, S18,?? tos22,666, anincrease of mmon-29%. Use this method to lW in the growth races for Taiwan and Uganda had a higher level of real Compare the data for the United States and Tawan between 1970 and 1980. During this period, GDP per capita, while experienced a higher growth rate in real Gop per capita. Convergence theory predicts that poor countries will grow more quickly than rich countries. which one of the following is a reason for this? Copying existing technologies is less expensive than developing them independently Rich countries devote a large fraction of their GDP to helping poor countries Poor countries tend to have higher birth rates than rich oountries

Explanation / Answer

(1) Growth rate = % Change in Real GDP per capita

(A) Taiwan:

1980: (4,483/2,319) - 1 = 1.93 - 1 = 0.93 = 93%

1990: (8,431/4,483) - 1 = 1.88 - 1 = 0.88 = 88%

2000: (14,504/8,431) - 1 = 1.72 - 1 = 0.72 = 72%

(B) Uganda:

1980: (190/182) - 1 = 1.04 - 1 = 0.04 = 4%

1990: (176/190) - 1 = 0.93 - 1 = -0.07 = -7%

2000: (240/176) - 1 = 1.36 - 1 = 0.36 = 36%

(2) During this period, United States had higher level of real GDP per capita and Taiwan had higher growth rate of real GDP per capita.

(3) Following is a reason for this:

- Copying existing technology is less expensive than developing

(4) Those who don't believe in theory of convergence point to countries such as Uganda.

(5) Following statements can explain why theory of convergence does not always hold:

- Many poor countries have much less human capital

- Many poor countries have much higher birth rate

(6) Growth experience of Taiwan proves that poor countries can have higher growth rate than rich countries**.

**Provide drop-down option in Comment section for exact wording

(7) Following is the primary reason for this:

- Copying existing technology is less expensive than developing

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