The catch-up illusion: Why developing nations that experience rapid economic growth can never catch up with advanced countries

Abstract

Previous research on the economic growth of late industrializing countries has been limited. This is primarily because most analyses are based on certain time periods and countries. The present paper tests the growth principles of latecomers and identifies the feasibility of closing the gap. In order to test the causality between exports and growth, a multivariate error correction model is tested, and intra-class correlation coefficient analysis is applied to compare the growth speeds of advanced countries and latecomers. The results show that latecomers acquire their economic growth through export-led industrialization and have similar economic growth speeds to those of advanced countries. However, despite the similarity between the growth speeds, the former cannot overtake the latter. First-generation latecomers that enjoyed rapid growth in the past, eventually failed to overtake the economic growth speed of the US. Thus, it is impossible for today’s rapidly growing countries, such as China, to overtake the US.