Convergence: Do Poor Countries Catch Up?

Whether poorer countries grow faster than richer ones and close the gap, what the evidence shows, and why some catch up while others fall behind.

If poorer countries have less capital, economic theory suggests they should grow faster than rich ones, because new investment adds more output where capital is scarce. They can also adopt technologies already invented elsewhere. This idea is called convergence.

Absolute convergence

Absolute convergence is the idea that all poor countries grow faster than rich ones, so incomes eventually become similar everywhere. For much of the twentieth century, the evidence did not support this. Many poor countries grew slowly, and the gap between the richest and poorest countries widened.

Conditional convergence

Economists such as Robert Barro found evidence for conditional convergence: poor countries tend to grow faster than rich ones only if they share similar characteristics, such as education levels, savings rates, institutions and policies. Countries converge toward their own steady states, which depend on these conditions.

Catch-up stories

Some countries caught up dramatically. Japan after the Second World War, and later South Korea, Taiwan, Singapore and Hong Kong, grew rapidly and reached high incomes. China and India have grown much faster than rich countries in recent decades, narrowing the gap.

Recent evidence

Research by Dev Patel, Justin Sandefur and Arvind Subramanian found that since around the 1990s, developing countries on average have grown faster than rich countries, suggesting that absolute convergence finally began to appear. But many countries still grow slowly, and some have fallen further behind.

Two starting points

Two countries start with the same low income. One invests in education, maintains stable institutions and opens to trade and technology. The other suffers conflict and weak governance. Decades later, the first has grown several times richer, while the second remains poor. Convergence depends on conditions, not just on starting poor.

What helps catch-up

Economists point to education, stable institutions, openness to trade and technology, infrastructure, and sound macroeconomic policy. Ideas and technology can flow across borders, allowing catch-up, but countries must be able to absorb and use them.

Thinking poor countries automatically catch up

Being poor creates the potential for fast growth, but not a guarantee. Without education, stable institutions and access to technology, poor countries may grow slowly or not at all.

Key takeaways

Convergence is the idea that poorer countries grow faster and catch up.
For much of the twentieth century, absolute convergence did not happen.
Conditional convergence depends on education, institutions and policies.
Since the 1990s, developing countries have on average grown faster than rich ones.