There are many reasons why a poor country may fail to catch up with a rich neighbour. Which of the following is NOT one of these reasons?
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1 mark, −0.333Economics of Growth and DevelopmentHarrod–Domar and Solow growth modelsGrowth facts and policyModerateabout 2 min
GATE 2021 Question 11: Harrod–Domar and Solow growth models
Answer and worked solution
Answer: (C)
This question asks which factor does NOT explain why a poor country might fail to catch up (i.e., which of these would actually help, not hinder, convergence).
(A) More rapid population growth in the poor country does hinder catch-up: in the Solow model, faster population growth spreads a given capital stock over more workers, lowering capital per worker and the corresponding steady-state income level. This is a valid reason for failure to converge.
(B) The rich country having more human capital does help explain the persistent income gap (higher effective labour productivity in the rich country). Valid reason.
(C) A higher saving ratio in the poor country would, per the Solow model, actually help the poor country accumulate capital faster and converge more quickly toward (or even past) the rich country's income level — this is the opposite of a barrier to catching up. This is NOT a valid reason for failing to catch up.
(D) Greater trade integration for the rich country could plausibly help sustain the rich country's advantage (better access to technology, markets, capital flows). Valid reason.
Therefore the answer is (C).
The trap: (A) The poor country may have more rapid population growth
This question requires reading each option carefully for its actual DIRECTION of effect on catch-up, not just recognizing 'growth-related factors' generically — (C) mentions saving, which sounds like a plausible growth-related factor to include, but its stated direction (higher saving in the poor country) actually works to CLOSE the gap, not widen it, making it the odd one out among genuine barriers to convergence.
Harrod–Domar and Solow growth models has come up 113 times in 7 exams since 2006.
What this question tests
This question is on Growth facts and policy, part of Harrod–Domar and Solow growth models in Economics of Growth and Development.
What the data show about growth and what policy can do about it.
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Question from the GATE 2021 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.