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:

Owner's Equity

The residual interest in the assets of a business after deducting its liabilities, representing the owner's claim against the company's assets.

Total Assets

The sum of all assets owned by a company, including current, non-current, tangible, and intangible assets, reflected on the balance sheet.

Period Of Time

A period of time is a specified duration or a length of time during which events, processes, or conditions occur or continue.

Accounting Equation

The fundamental equation of double-entry bookkeeping: Assets = Liabilities + Shareholder's Equity.