Low rates of savings is one factor that can cause a developing country to fail to converge. The convergence hypothesis suggest that developing countries should have higher rates of growth of productivity and GDP, which should lead to the per capita GDP, and the gap narrowing between developing and developed economies over time. Other reasons that countries may fail to converge include: low rates of investment, political instability, a lack of property rights, poor education and health, taxes and regulations that discourage working and investing, and restrictions on trade.
(Study Session 4, LOS 15.j) |
