Factors of Convergence and Divergence in the Global Economy: A Brief Review

Abstract

The Great Divergence, namely the divergence in per capita GDP between the first and the third worlds, started around 1820 and continued at an accelerated pace during the next half of the 19th century and at a slower pace in the 20th century. Divergence of the West was primarily associated with a technological breakthrough and economic development that led to higher labor productivity and GDP per capita. However, in the late 1980s the Great Convergence, which implied substantial advance of economic growth rates of developed West by developing countries of the third world, replaced the Great Divergence. Great Divergence was due to the improving of education and public health systems, in other words, to human capital development. There is a bulk of literature focusing on convergence or divergence of various countries. The purpose of this article is to study these factors by the means of review and systematization of relevant literature. Authors briefly analyze theoretical and empirical studies describing drivers of convergence and divergence in the global economy. They also consider statistical data on world regions for the period since 1960 until present days to justify conclusions. The article concludes that there are quite a large number of works devoted to the analysis of factors explaining the divergence or convergence trends in the world. This review is useful in terms of understanding current trends in the world economy, as well as developing scenarios of its development in the future.

Keywords

• economic growth
• world economy
• convergence
• divergence
• income inequality