Catch Up Effect

AAA

DEFINITION of '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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Developed Economy

    While there is no one, set definition of a developed economy ...
  2. Microeconomics

    The branch of economics that analyzes the market behavior of ...
  3. Economics

    A social science that studies how individuals, governments, firms ...
  4. Emerging Market Economy

    A nation's economy that is progressing toward becoming advanced, ...
  5. Macroeconomics

    The field of economics that studies the behavior of the aggregate ...
  6. Monopoly

    A situation in which a single company or group owns all or nearly ...
Related Articles
  1. Investing Basics

    Broadening Your Portfolio's Borders

    Find out what type of international fund might suit your needs in gaining exposure to foreign markets.
  2. Options & Futures

    Evaluating Country Risk For International Investing

    Investing overseas begins with determining the risk of the country's investment climate.
  3. Forex Education

    The New World Of Emerging Market Currencies

    Take advantage of foreign currency markets without stepping out of your house.
  4. Economics

    What Is An Emerging Market Economy?

    Emerging markets provide new investment opportunities, but there are risks - both to residents and foreign investors.
  5. Economics

    What is a diseconomy of scale and how does this occur?

    Take a deeper look into diseconomies of scale, the economic phenomenon that can make companies less efficient as they become too large.
  6. Economics

    What is backward integration and how does it relate to economies of scale?

    See how a firm can realize greater economies of scale by engaging in backward integration mergers with one or more of its suppliers.
  7. Economics

    How do economies of scale work with globalization?

    Discover how globalization can lead to unprecedented economies of scale for firms across the world, leading to higher global efficiency and productivity.
  8. Fundamental Analysis

    How do economists and psychologists calculate diminishing marginal utility differently?

    Find out why disagreements about the validity of the law of diminishing marginal utility usually boil down to arguments about definitions.
  9. Investing Basics

    Are marginal costs fixed or variable costs?

    Understand how to identify marginal costs as a function of fixed and variable costs. This article addresses how marginal costs vary based on production changes.
  10. Economics

    Can Internet companies be vertically integrated?

    Find out how online businesses are beginning to take advantage of vertical integration for many of the same reasons as traditional businesses.

You May Also Like

Hot Definitions
  1. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  2. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  3. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  4. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  5. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  6. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
Trading Center