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?

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  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 >>
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