Note: Calculated on the data from World Bank (2013, NE.GDI.FTOT.ZS.)
per capita (e.g. Alfaro et al., 2004; Blonigen and Wang, 2005; Borensztein et al., 1998). Moreover, FDI has a significantly positive direct effect on TFP growth, which is extremely important, as more than half of the cross-country variation in both income per capita and its growth results from differences in TFP and its growth, respectively (for a detailed review see Woo, 2009).
This taken into account, the particularly high-economic growth rates in the middle-income countries are clearly not coincidental.
Possible global implications of the convergence-divergence pattern
Thus, the structure of convergence-divergence pattern in the recent years is rather complex. The gap between the high-income and the middle-income countries has been decreasing rapidly. This fact is particularly noteworthy when taking into account that the middle-income countries currently accommodate about 70 percent of the world population (about five billion people). If the current pace persists in the nearest decades, the prospects for these 70 percent look truly bright, as the gap between the high-income OECD countries and the middle-income countries will essentially
Proportion of investments in GDP (percent), 2008
disappear in just 15-20 years. However, such an over-optimistic view about the
middle-income countries fully converging to the high-income ones is very doubtful due
to the prospect of the “Reindustrialization of the West (or possibly, just the USA based
on cheap energy coming from shale oil,” on the one hand, and the “middle-income
trap” awaiting the middle-income countries, on the other. Indeed, a number of Latin
American countries were the first to experience stagnation at middle-income levels and
failure to move further into the ranks of high-income countries (note that exactly such
stagnation could easily be caused by too weak democratically legitimated institutions which seems a necessity to further growth according to some economic thought (see, e.g. Acemoglu, 2009). A number of works reveal the same threat to be currently looming large for many developing countries in other regions, notably in Asia (including China) (see, e.g. Grinin and Korotayev, 2010; Kohli and Mukherjee, 2011; Cai, 2012; Kharas and Kohli, 2011; Aiyar et al., 2013).
The gap between the high-income and the low-income countries has also been decreasing lately, but at a much slower pace. Meanwhile, the gap between the middle-income and the low-income countries has been growing steadily. This latter gap was about three times in the early 1980s and looked insignificant as compared to the colossal gap (by almost ten times) between the high-income and the middle-income countries. The current picture is remarkably different: the low-income countries lag behind the middle-income by more than five times, which is almost equal to the gap between the middle-income and the high-income countries.
As regards the low-income countries, we would like to emphasize that their total population does not exceed one billion people. (World Bank, 2013, SP.POP.TOTL), which is less than the total population of the high-income countries. In other words, “the bottom billion” is currently less than “the golden billion.” This means that when looking at the convergence and divergence processes through the prism of the population numbers in the converging/diverging countries, we are bound to state that currently the convergence processes clearly prevail over the divergence processes (much more people live in the converging countries than in the diverging ones). However, this disposition could very likely dramatically change in the coming decades, as the population growth rate in the “bottom billion” is much higher than in the rest of the world. Indeed, the African populations have recently been growing more rapidly than the non-African developing world had grown at its peak, and that the ratio of young dependents to the working-age population had exceeded historical developing-country norms by 1970, and remains above these through 2000 (Ndulu et al., 2007, p. 106). A decade of economic successes was barely enough to bring many countries just to the WHO recommended level of per capita food consumption; however, if the fertility decline fails to accelerate and population continues rocketing up, sustaining this level (let alone surpassing it and starting to catch-up, which is utterly necessary for improving the living standards of the majority of population) is likely to become “mission impossible.”
Our analysis reveals a rather significant re-configuration of the world system in the latest 30 years. It is namely the middle-income countries that demonstrated the highest economic growth rates after 1990 (and even more so after 2000). This is quite explicable, as in the modern world namely the middle-income countries generally have the best opportunities for achieving high-economic growth rates. Indeed, the workforce in such countries is still rather cheap (as compared to the high-income ones), but already benefits
from rather high levels of education and health system, which greatly increases the quality of the workforce (as compared to the low-income countries). The low-income countries, on the other hand, are lagging behind in terms of education (especially secondary and tertiary education) and still experience extremely high population growth rates, which increases the age-dependency ratio and decreases the economic growth rates. While the middle-income countries have been converging to the high-income ones, the low-income countries have actually been diverging from the middle-income ones. This is a rather threatening trend which requires specific international attention to removing the growth obstacles in the low-income countries (among other things, increasing the education level and the quality of the workforce, as well as bringing down the extreme population growth rates). This is especially true regarding the type of developmental cooperation with those low-income countries that should shift away from a philosophy of power relations (dictate of the stronger) toward a philosophy of cooperation and mutual esteem, and understanding of the real needs of poor countries. This particularly underlines the urge for another global political structure.
Abel, A.B. and Bernanke, B.S. (2005), Macroeconomics, 5th ed., Pearson/Addison Wesley, Boston, MA.
Acemoglu, D. (2009), Introduction to Modern Economic Growth, Princeton University Press, Princeton, NJ.
AfDB, OECD, UNDP, ECA (2013), African Economic Outlook 2013, African Development Bank, Organisation for Economic Co-Operation and Development, United Nations Development Programme, United Nations Economic Commission for Africa, Tunis.
Aiyar, S., Duval, R., Puy, D., Wu, Y. and Zhang, L (2013), “Growth slowdowns and the middle-income trap”, IMF Working Paper No. WP/13/71, International Monetary Fund, Washington, DC.
Alfaro, L.A., Chanda, S., Kalemli-Ozcan, S. and Sayek, S. (2004), “FDI and economic growth: the role of local financial markets”, Journal of International Economics, Vol. 64 No. 1, pp. 89-112.
Barro, R.J. (1991), “Economic growth in a cross section of countries”, The Quarterly Journal of Economics, Vol. 106 No. 2, pp. 407-443.
Bianchi, M. (1997), “Testing for convergence: evidence from non-parametric multimodality tests”,
Journal of Applied Econometrics, Vol. 12 No. 4, pp. 393-409.
Blonigen, B. and Wang, M. (2005), “Inappropriate pooling of wealthy and poor countries in empirical FDI studies”, in Moran, T., Graham, E. and Blomstrom, M. (Eds), Does Foreign Investment Promote Development?, Institute for International Economics, Washington, DC, pp. 221-224.
Borensztein, E., de Gregorio, J. and Lee, J.-W. (1998), “How does foreign direct investment affect growth?”, Journal of International Economics, Vol. 45 No. 1, pp. 115-135.
Caggiano, G. and Leonida, L. (2009), “International output convergence: evidence from an autocorrelation function approach”, Journal of Applied Econometrics, Vol. 24 No. 1, pp. 139-162.
Cai, F. (2012), “Is there a “middle-income trap”? Theories, experiences and relevance to china”, China & World Economy, Vol. 20 No. 1, pp. 49-61.
Canova, F. and Marcet, A. (1995), The Poor Stay Poor: Nonconvergence Across Countries and Regions, Universitat Pompeu Fabra, Barcelona.
Caselli, F., Esquivel, G. and Lefort, F. (1996), “Reopening the convergence debate: a new look at cross-country growth empirics”, Journal of Economic Growth, Vol. 1 No. 3, pp. 363-389.
Collier, P. (2007), The Bottom Billion, Oxford University Press, Oxford.
Structure of the present-day convergence
de la Fuente, A. (2003), “Convergence equations and income dynamics: the sources of OECD convergence, 1970–1995”, Economica, Vol. 70 No. 280, pp. 655-671.
De Long, J.B. and Summers, L.H. (1991), “Equipment investment and economic growth”,
Quarterly Journal of Economics, Vol. 106 No. 2, pp. 445-502.
Desdoigts, A. (1994), Changes in the World Income Distributions: A Non-Parametric Approach to Challenge the Neo-Classical Convergence Argument, Humboldt Universitaet Berlin, Berlin.
Durlauf, S.N. and Johnson, P.A. (1995), “Multiple regimes and cross-country growth behaviour”,
Journal of Applied Econometrics, Vol. 10 No. 4, pp. 365-384.
Epstein, P., Howlett, P. and Schulze, M.S. (2007), “Trade, convergence, and globalisation: the dynamics of the international income distribution, 1950–1998”, Explorations in Economic History, Vol. 44 No. 1, pp. 100-113.
Frantzen, D. (2004), “Technological diffusion and productivity convergence: a study for manufacturing in the OECD”, Southern Economic Journal, Vol. 71 No. 2, pp. 352-376.
Gerschenkron, A. (1952), Economic Backwardness in Historical Perspective: A Book of Essays, Belknap Press of Harvard University Press, Cambridge, MA.
Grinin, L. and Korotayev, A. (2010), “Will the global crisis lead to global transformations? 2. The coming epoch of new coalitions”, Journal of Globalization Studies, Vol. 1 No. 2, pp. 166-183.
Ho, T.-W. (2006), “Income thresholds and growth convergence: a panel data approach”, The Manchester School, Vol. 74 No. 2, pp. 170-189.
Hoekman, B.M., Maskus, K.E. and Saggi, K. (2005), “Transfer of technology to developing countries: unilateral and multilateral policy options”, World Development, Vol. 33 No. 10, pp. 1587-1602.
Islam, N. (2003), “What have we learnt from the convergence debate?”, Journal of Economic Surveys, Vol. 17 No. 3, pp. 309-362.
Jones, C. (1997), “Convergence revisited”, Journal of Economic Growth, Vol. 2 No. 2, pp. 131-153.
Kharas, H. and Kohli, H. (2011), “What is the middle income trap, why do countries fall into it, and how can it be avoided”, Global Journal of Emerging Market Economies, Vol. 3 No. 3, pp. 281-289.
King, R.G. and Levine, R. (1993), “Finance and growth: Schumpeter might be right”, Quarterly Journal of Economics, Vol. 108 No. 3, pp. 717-737.
Kohli, H.A. and Mukherjee, N. (2011), “Potential costs to Asia of the middle income trap”, Global Journal of Emerging Market Economies, Vol. 3 No. 3, pp. 291-311.
Korotayev, A. and de Munck, V. (2013), “Advances in development reverse inequality trends”,
Journal of Globalization Studies, Vol. 4 No. 1, pp. 105-124.
Korotayev, A., Zinkina, J., Bogevolnov, J. and Malkov, A. (2011a), “Global unconditional convergence among larger economies after 1998?”, Journal of Globalization Studies, Vol. 2 No. 2, pp. 25-62.
Korotayev, A., Zinkina, J., Bogevolnov, J. and Malkov, A. (2011b), “Unconditional convergence among larger economies”, in Debin, L. (Ed.), Great Powers, World Order and International Society: History and Future, The Institute of International Studies, Jilin University, Changchun, pp. 70-107.
Korotayev, A., Zinkina, J., Bogevolnov, J. and Malkov, A. (2012), “Unconditional convergence among larger economies after 1998?”, in Grinin, L., Ilyin, I. and Korotayev, A. (Eds), Globalistics and Globalization Studies, Moscow University, Uchitel, pp. 246-280.
Lee, K., Hashem Pesaran, M. and Smith, R. (1997), “Growth and convergence in a multi-country empirical stochastic Solow model”, Journal of Applied Econometrics, Vol. 12 No. 4, pp. 357-392.
Levine, R. and Renelt, D. (1992), “A sensitivity analysis of cross-country growth regressions”, American Economic Review, Vol. 82 No. 4, pp. 942-963.
Malamud, B. and Assane, D. (2013), “Slow growth and slow convergence in sub-Saharan Africa”,
Applied Economics Letters, Vol. 20 No. 4, pp. 377-381.
Mankiw, N.G. (2008), Principles of Macroeconomics, 5th ed., South-Western College Publishing, Boston, MA.
Mankiw, N.G., Romer, D. and Weil, D.N. (1992), “A contribution to the empirics of economic growth”, The Quarterly Journal of Economics, Vol. 107 No. 2, pp. 407-437.
Nabin, M., Nguyen, X. and Sgro, P. (2013), “On the relationship between technology transfer and economic growth in Asian economies”, The World Economy, Vol. 36 No. 7, pp. 935-946.
Ndulu, B.J., Chakraborti, L., Lijane, L., Ramachandran, V. and Wolgin, J. (2007), Challenges of African Growth: Opportunities, Constraints, and Strategic Directions, The World Bank, Washington, DC.
Owen, A.L., Videras, J. and Davis, L. (2009), “Do all countries follow the same growth process?”,
Journal of Economic Growth, Vol. 14 No. 4, pp. 265-286.
Paap, R. and van Dijk, H.K. (1994), “Distribution and mobility of wealth of nations”, working paper, Tinbergen Institute, Erasmus University, Rotterdam, October.
Petrakos, G. and Artelaris, P. (2009), “European regional convergence revisited: a weighted least squares approach”, Growth and Change, Vol. 40 No. 2, pp. 314-331.
Quah, D.T. (1996a), “Convergence empirics across economies with (some) capital mobility”,
Journal of Economic Growth, Vol. 1 No. 1, pp. 95-124.
Quah, D.T. (1996b), “Empirics for economic growth and convergence”, European Economic Review, Vol. 40 No. 6, pp. 1353-1375.
Quah, D.T. (1996c), “Twin peaks: growth and convergence in models of distribution dynamics”, The Economic Journal, Vol. 106 No. 437, pp. 1045-1055.
Rodrik, D. (2013), “Unconditional convergence in manufacturing”, The Quarterly Journal of Economics, Vol. 128 No. 1, pp. 165-204.
Romero-Avila, D. (2009), “The convergence hypothesis for OECD countries reconsidered: panel data evidence with multiple breaks, 1870–2003”, The Manchester School, Vol. 77 No. 4, pp. 552-574.
Sachs, J.D., Warner, A., Aslund, A. and Fischer, S. (1995), “Economic reform and the process of global integration”, Brookings Papers on Economic Activity, Vol. 1 No. 25, pp. 1-118.
Sadik, J. (2008), “Technology adoption, convergence, and divergence”, European Economic Review, Vol. 52 No. 2, pp. 338-355.
Sala-i-Martin, X.X. (1996), “The classical approach to convergence analysis”, The Economic Journal, Vol. 106 No. 437, pp. 1019-1036.
Samuelson, P.A. and Nordhaus, W.D. (2005), Economics, 18th ed., McGraw-Hill, Boston, MA.
Seshanna, S. and Decornez, S. (2003), “Income polarization and inequality across countries: an empirical study”, Journal of Policy Modeling, Vol. 25 No. 4, pp. 335-358.
Solow, R.M. (1956), “A contribution to the theory of economic growth”, The Quarterly Journal of Economics, Vol. 70 No. 1, pp. 65-94.
Villaverde, J. and Maza, A. (2011), “Globalization, growth, and convergence”, World Economy, Vol. 36 No. 6, pp. 952-971.
Woo, J. (2009), “Productivity growth and technological diffusion through foreign direct investment”, Economic Inquiry, Vol. 47 No. 2, pp. 226-248.
Structure of the present-day convergence
Workie, M. (2003), “Absolute convergence across time and space: new empirical evidence for an old debate”, Ekonomicky Casopis, Vol. 51 No. 10, pp. 1270-1291.
World Bank (2013), World Development Indicators, World Bank, Washington, DC, available at: http://data.worldbank.org/indicator
About the authors
Dr Andrey Korotayev (born in Moscow) attended the Moscow State University, where he received a BA degree in 1984 and an MA in 1989. He earned a PhD in 1993 at the Manchester University, and in 1998 a Doctor of Sciences degree at the Russian Academy of Sciences. He is currently the Head of the Laboratory of Monitoring of the Risks of Sociopolitical Destabilization of the National Research University Higher School of Economics and a Senior Research Professor at the Center for Big History and System Forecasting of the Institute of Oriental Studies as well as in the Institute for African Studies of the Russian Academy of Sciences. In addition, he is a Senior Research Professor of the Laboratory of Political Demography and Macrosocial Dynamics of the Russian Academy of National Economy and Civil Administration, as well as a Full Professor of the Faculty of Global Studies of the Moscow State University. He is co-editor of the journals Social Evolution & History and Journal of Globalization Studies, as well as History & Mathematics and Evolution almanac. Together with Askar Akayev and George Malinetsky he is a coordinator of the Russian Academy of Sciences Program “System Analysis and Mathematical Modeling of World Dynamics.” Korotayev is a laureate of the Russian Science Support Foundation in “The Best Economists of the Russian Academy of Sciences” nomination (2006). In 2012 he was awarded with the Gold Kondratieff Medal by the International N.D. Kondratieff Foundation. Dr Andrey Korotayev is the corresponding author and can be contacted at: email@example.com
Dr Julia Zinkina has her PhD in History and works as a Research Fellow at the Laboratory for Monitoring Sociopolitical Destabilization Risks, Higher School of Economics, and Institute for African Studies (Russian Academy of Sciences), Moscow, Russia.
To purchase reprints of this article please e-mail: firstname.lastname@example.org Or visit our web site for further details: www.emeraldinsight.com/reprints