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By the end of this section, you will be able to:

  • Explain economic convergence
  • Analyze various arguments for and against economic convergence
  • Evaluate the speed of economic convergence between high-income countries and the rest of the world

Some low-income and middle-income economies around the world have shown a pattern of convergence    , in which their economies grow faster than those of high-income countries. GDP increased by an average rate of 2.7% per year in the 1990s and 2.3% per year from 2000 to 2008 in the high-income countries of the world, which include the United States, Canada, the countries of the European Union, Japan, Australia, and New Zealand.

[link] lists 10 countries of the world that belong to an informal “fast growth club.” These countries averaged GDP growth (after adjusting for inflation) of at least 5% per year in both the time periods from 1990 to 2000 and from 2000 to 2008. Since economic growth in these countries has exceeded the average of the world’s high-income economies, these countries may converge with the high-income countries. The second part of [link] lists the “slow growth club,” which consists of countries that averaged GDP growth of 2% per year or less (after adjusting for inflation) during the same time periods. The final portion of [link] shows GDP growth rates for the countries of the world divided by income.

(Source: http://databank.worldbank.org/data/views/variableSelection/selectvariables.aspx?source=world-development-indicators#c_u)
Economic growth around the world
Country Average Growth Rate of GDP 1990–2000 Average Growth Rate of GDP 2000–2008
Fast Growth Club (5% or more per year in both time periods)
Cambodia 7.1% 9.1%
China 10.6% 9.9%
India 6.0% 7.1%
Ireland 7.5% 5.1%
Jordan 5.0% 6.3%
Laos 6.5% 6.8 %
Mozambique 6.4% 7.3%
Sudan 5.4% 7.3%
Uganda 7.1% 7.3%
Vietnam 7.9% 7.3%
Slow Growth Club (2% or less per year in both time periods)
Central African Republic 2.0% 0.8%
France 2.0% 1.8%
Germany 1.8% 1.3%
Guinea-Bissau 1.2% 0.2%
Haiti –1.5% 0.3%
Italy 1.6% 1.2%
Jamaica 0.9% 1.4%
Japan 1.3% 1.3%
Switzerland 1.0% 2.0%
United States 3.2% 2.2%
World Overview
High income 2.7% 2.3%
Low income 3.8% 5.6%
Middle income 4.7% 6.1%

Each of the countries in [link] has its own unique story of investments in human and physical capital, technological gains, market forces, government policies, and even lucky events, but an overall pattern of convergence is clear. The low-income countries have GDP growth that is faster than that of the middle-income countries, which in turn have GDP growth that is faster than that of the high-income countries. Two prominent members of the fast-growth club are China and India, which between them have nearly 40% of the world’s population. Some prominent members of the slow-growth club are high-income countries like the United States, France, Germany, Italy, and Japan.

Will this pattern of economic convergence persist into the future? This is a controversial question among economists that we will consider by looking at some of the main arguments on both sides.

Arguments favoring convergence

Several arguments suggest that low-income countries might have an advantage in achieving greater worker productivity and economic growth in the future.

Questions & Answers

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Source:  OpenStax, Macroeconomics. OpenStax CNX. Jun 16, 2014 Download for free at http://legacy.cnx.org/content/col11626/1.10
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