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.

---

Definitions:

Deferred Expense

A deferred expense is an expenditure that is made in advance and recorded as an asset until it is consumed or its value expires, at which point it is charged to expense.

Accrual Basis

An accounting method where transactions are recorded when they are earned or incurred, regardless of when cash is exchanged.

Matching Concept

An accounting principle that requires the expenses to be matched with the revenues they helped to generate in the same accounting period.

Cash Is Received

The acquisition of monetary funds through various means, such as sales, financing, or donations.