Answer to Question #161050 in Macroeconomics for June

Question

What does it mean by “convergence” among countries? On what conditions do countries converge at their GDP level? Please explain using the Solow-growth model.

Answer 1

Convergence among countries is the hypothesis that poorer economies' per capita incomes will tend to grow at faster rates than richer economies.

If countries have the same population growth rate, savings rate, and capital depreciation rate, then they have the same steady state, so they will converge hence Solow growth model predicts, conditional convergence.