Two students, Ryan Wattenberg and Emma Bennett, are discussing the idea of convergence over coffee. Ryan considers convergence to be true in theory but impractical in the real world. He claims that most low-income developing countries are stuck in a cycle of poverty and so cannot catch up with developed countries. With increased globalization, Emma feels that the developing countries are growing and will converge with higher-income countries eventually. Zoey Smith, a friend of theirs, however thinks that the evidence on convergence is rather unclear. Despite the fact that developing countries are growing much faster than the developed countries, she thinks that they will not be able to catch up with the developed nations in the near future. Which of the following, if true, would strengthen Ryan\'s argument that developing countries will not catch up with developed countries? a. Most developed countries do not have similar resources endowments. b. Some of the fastest growing developing countries in the world also score well on many social indicators. c. Credit creation by the formal banking system in most developing countries has been falling or stagnant in the last five years. d. High population in developing countries, which for decades acted as a drag on growth, now forms a productive workforce. e. Most developed countries experienced a high degree of inequality in the initial phases of economic growth. Solution Ans = D The GDP growth rates of developing nations are on average more than those of developed nations.During the period 1965-99 , the average annual growth rate was 4.1 percent for the low- income nations, 4.2 percent for middle-income nations, and 3.2 percent for high-income nations . Does this imply that the developing nations would soon converge with the developed? Unfortunately, the growth patterns explained here do not imply that the world is on its path to “convergence\". Much faster population growth in most of the developing nations offsets the comparatively faster growth rates of GDP, leading to GDP per capita growth to be relatively low or perhaps even negative.Thus, the gap between the average GNP per capita between developing and developed nations has widened. During the past 40 years of the 20th century, the gulf between the average income of the richest 20 nations and that of the poorest 20 has doubled in size. Sustained economic growth of the developing nations is an essential instrument for reducing poverty and enhancing people’s standard of living. However, only economic growth is not enough. In few nations poverty worsened in spite of the overall economic growth, due to increased income inequality . This economic growth is socially unsustainable and causes social conflict, and is harmful to further growth. Also, fast economic growth may lead to fast environmental degradation, hampering the quality of life and thus decreasing economic productivity..

1. Two students, Ryan Wattenberg and Emma Bennett, are discussing the idea of convergence over
coffee. Ryan considers convergence to be true in theory but impractical in the real world. He
claims that most low-income developing countries are stuck in a cycle of poverty and so cannot
catch up with developed countries. With increased globalization, Emma feels that the developing
countries are growing and will converge with higher-income countries eventually. Zoey Smith, a
friend of theirs, however thinks that the evidence on convergence is rather unclear. Despite the
fact that developing countries are growing much faster than the developed countries, she thinks
that they will not be able to catch up with the developed nations in the near future.
Which of the following, if true, would strengthen Ryan's argument that developing countries
will not catch up with developed countries?
a. Most developed countries do not have similar resources endowments.
b. Some of the fastest growing developing countries in the world also score well on many social
indicators.
c. Credit creation by the formal banking system in most developing countries has been falling or
stagnant in the last five years.
d. High population in developing countries, which for decades acted as a drag on growth, now
forms a productive workforce.
e. Most developed countries experienced a high degree of inequality in the initial phases of
economic growth.
Solution
Ans = D
The GDP growth rates of developing nations are on average more than those of developed
nations.During the period 1965-99 , the average annual growth rate was 4.1 percent for the low-
income nations, 4.2 percent for middle-income nations, and 3.2 percent for high-income nations .
Does this imply that the developing nations would soon converge with the developed?
Unfortunately, the growth patterns explained here do not imply that the world is on its path to
“convergence". Much faster population growth in most of the developing nations offsets the
comparatively faster growth rates of GDP, leading to GDP per capita growth to be relatively
low or perhaps even negative.Thus, the gap between the average GNP per capita between
developing and developed nations has widened. During the past 40 years of the 20th century, the
gulf between the average income of the richest 20 nations and that of the poorest 20 has doubled
in size.
Sustained economic growth of the developing nations is an essential instrument for reducing

2. poverty and enhancing people’s standard of living. However, only economic growth is not
enough. In few nations poverty worsened in spite of the overall economic growth, due to
increased income inequality . This economic growth is socially unsustainable and causes social
conflict, and is harmful to further growth. Also, fast economic growth may lead to fast
environmental degradation, hampering the quality of life and thus decreasing economic
productivity.