Catch Up Effect

What is the 'Catch Up Effect'

A theory speculating that, since poorer economies tend to grow more rapidly than wealthier economies, all economies in time will converge in terms of per capita income. In other words, the poorer economies will literally "catch-up" to the more robust economies.


The catch-up effect is also referred to as the theory of convergence.

BREAKING DOWN 'Catch Up Effect'

Because developing markets have access to the technological know-how of the advanced nations, they often experienced rapid rates of growth. However, although developing countries can see faster economic growth than more economically advanced countries, the limitations posed a lack of capital can greatly reduce a developing country's ability to catch-up.


Historically, some developing countries have been very successful in managing resources and securing capital to efficiently increase economic productivity; however, this has not become the norm on a global scale.

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RELATED FAQS
  1. When can catch-up contributions start?

    Learn when you can start making catch-up contributions to qualified retirement plans such as 401(k)s, 403(b)s, SIMPLE 401(k)s ... Read Answer >>
  2. Who can make catch-up contributions?

    Learn when you become eligible for catch-up contributions to your IRA or your company's retirement plan, and find out about ... Read Answer >>
  3. Do I need to hit my 401(k) contribution limit before I can begin making catch-up ...

    You generally need to reach the limit established by the plan in order to make catch-up contributions; therefore, if the ... Read Answer >>
  4. What is the catch-up contribution limit for qualified deferred tax plans?

    Learn about statutory limits established by the U.S. Internal Revenue Service for catch-up contributions to deferred retirement ... Read Answer >>
  5. Is Mexico an emerging market economy?

    Learn the difference between a developed economy and an emerging market economy, and understand why Mexico is an emerging ... Read Answer >>
  6. How old do I have to be to make catch-up contributions?

    Learn about the rules and limitations for catch-up contributions for common retirement plans, such as 401(k), 403(b), IRAs ... Read Answer >>
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