Catch-up growth

The fastest-growing economies are rarely the richest. Being behind, it turns out, can be an advantage, and that advantage is catch-up growth.

Catch-up growth is the tendency for poorer economies to grow faster than rich ones by adopting technologies, methods, and capital that the leaders have already developed. Because they can borrow rather than invent, latecomers can advance more quickly than the frontier moves.

The advantage of backwardness

The core idea, sometimes called the advantage of backwardness, is that a country far behind the technological frontier can grow rapidly simply by closing the gap, importing machinery, copying proven techniques, and learning from those ahead. It does not have to bear the cost and risk of inventing; it can adopt what already works. This gives the poor, in principle, a faster potential growth rate than the rich, who must generate new productivity gains themselves.

Why it is faster, then slows

Catch-up growth is rapid precisely because the gains are easy and available: capital is scarce so its returns are high, and best-practice technology can be imported wholesale. But the advantage shrinks as the gap closes. As a catching-up economy approaches the frontier, the cheap gains from imitation are exhausted, and it must increasingly innovate rather than copy, at which point its growth slows toward the frontier's slower pace. The dramatic growth of fast-developing economies tends to decelerate as they grow richer for exactly this reason.

Convergence that is not automatic

The theory predicts convergence, poorer countries catching up with richer ones, but the historical record shows this happens only sometimes. Some economies have converged spectacularly; many others have stagnated or fallen further behind. The difference lies largely in whether a country has the institutions, human capital, and openness to actually absorb and deploy the available technology. Catch-up is a potential, not a guarantee, and realising it requires the conditions that let borrowed knowledge take root.

Catch-up growth explains both the spectacular rise of successful developing economies and the disappointment of those that failed to converge. The opportunity to grow by adopting what others have built is real and powerful, but seizing it depends on the unglamorous foundations that determine whether a country can put borrowed knowledge to work.