The Rapid Economic Convergence Phenomenon

Abstract

The global economic convergence phenomenon refers to the process of catching up by the less developed countries (LDCs) with the rich countries. Currently a large variance exists in the per capita GDP of nations ranging from less than $500/year to over $40,000/ year. In a wide cross-section of countries in this study, rapid economic convergence is noted over the last few decades. Essential conditions for convergence are a difference in the level of productivity, a difference in the annual growth rate of productivity in favor of the catching up LDCs, and a relatively long-run time horizon. Many LDCs, most notably China and India, are poised to meet the above three conditions for economic convergence. Within the last two decades, three turning points in human experiences have occurred, which have given special thrust to the convergence process, namely: (1) a universal and secular decline in fertility rates; (2) a rapid transfer and dissemination of technologies to LDCs at low marginal cost; and (3) an opening up of international trade and commerce resulting from the demise of the Soviet Union in 1991. (JEL O47) International Advances in Economic Research (2006) 12:433 * IAES 2006 DOI: 10.1007/s11294-006-9037-z