CAS EC 102 Lecture Notes - Lecture 8: Absolute Convergence, Marginal Product, Malaria
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Why we would expect convergence: because of (1) diminishing margin of capital. Marginal product is higher than those in the richer countries. Poor countries can attract more capital, more funds to be used in investment purposes; and (2) tech- nology transfers, poor countries don"t have to expend resources and can take ad- vantage of the resources. Low k stock > high mpk > high returns to investment. Poor countries will grow faster than richer countries and catch up in terms of per capita gdp. Poor countries will grow faster than richer countries, and eventually catch up in terms of gdp per capita. The point is that it will be difficult for countries to overcome all of these issues and grow with the hard locations they are in. The only way poor countries could improve is with foreign trade and policy. e. g. zimbabwe desperately poor, botswana stable, growing, good economy.
