Question

Between 2000 and 2009, real output per person in the emerging world grew at an average annual rate of 7.6%, 4.5 percentage points higher than the rate seen in rich countries. As a result, the gap between the developed and developing worlds narrowed quickly over the period. Since 2009, growth rates in the developing world have dropped and were only 1.1 percentage points higher than developed countries in 2013. Projections for 2014 put growth in developing countries just 0.39 percentage points above those in developed countries.

a) Use the economic growth model to explain the convergence hypothesis. Include a diagram in your response.

b) Discuss what factors could have driven the rapid growth in the developing world from 2000-2009.

c) What factors are important to sustain long run growth in these developing economies? Explain.

d) In 2009, per capita GDP in developed economies was on average 3.6 times as large as in developing economies. If per capita growth maintained the same rates as between 2000 and 2009, it would take about 30 years for developing countries to catch up to the developed world. If per capita growth slows to 4.2% in developing countries and remains at 3.1% in developed countries, how many years would it take developing economies to catch up to developed economies? (Round to the nearest year)

Answer 1