The Catch-Up Effect Says That Countries with Low Income Can

question 61

Essay

The catch-up effect says that countries with low income can grow faster than countries with higher income. However, in statistical studies that include many diverse countries we do not observe the catch-up-effect unless we control for other variables that affect productivity. Considering the determinants of productivity, list and explain some things that would tend to prohibit or limit a poor country's ability to catch up with the rich ones.

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Definitions:

Materials Price Variance

The difference between the actual cost of materials and the standard or expected cost, used to assess cost management efficiency.

Materials Quantity Variance

Materials Quantity Variance is the difference between the expected amount of materials to produce a given output and the actual amount of materials used, highlighting efficiency in material usage.

Variable Overhead

Expenses that vary with production volume, such as utility costs in a factory.

Standard Costs

Predetermined or estimated costs for a product or service, used for budgeting purposes and as a benchmark for measuring performance.