Convergence Hypothesis
Do poor countries catch up? Absolute vs. conditional convergence and what the data says.
The Convergence Hypothesis model, in writing
Definition
The Solow prediction that capital-poor economies grow faster: absolutely (all to the same point) only if fundamentals match; conditionally (each to its own steady state) in general.
growth ≈ λ(ln y* − ln y); β-convergence regressions test λ > 0
The intuition
Poor economies sit on the steep part of the production function where capital earns most, so catch-up is automatic IF saving, institutions, and technology access match. The data verdict: no absolute convergence worldwide, solid conditional convergence, clubs converge internally.
Exam tip
Cite the twin exhibits: East Asia catching up (conditional convergence working) and Sub-Saharan divergence (different steady states).
Related models in Advanced Macro & Growth