Possible Success Of The New Global Panorama

1721 Words Jan 29th, 2016 7 Pages
possible success in the new global panorama. In general terms, if we compare Nigeria and Turkey GDPs, we see that in only eight years Nigeria has narrowed the gap between them. If we would continue the trajectory, both countries would converge and probably exchange their paths. It is possible because, according to the latest data in the World Bank, GDP annual growth averaged is bigger in Nigeria (6.3%) than in Turkey (2.9%), although Turkey has a higher GDP (see appendix D). Figure 2: Nigeria and Turkey’s GDPs (US current $) (Source: World Bank, 2015)
The possible converge between Nigeria and Turkey is explained by the Solow-Swan model (1956) that is known as the exogenous growth model/neoclassical growth model, based on the theory of diminishing returns of capital (Acemoglu 2009).
In the long-run, because of the structure of the production function, the capital is subject to diminishing returns, that is to say, “as the stock of capital rises the extra output produced from an additional unit per capita falls”. That means the curve of the productivity becomes flatter as the amount of capital increases (Mankiw and Taylor 2011, pp. 536).
This theory connects with the “Catch-up Effect” or “Global Convergence Theory”, which states that “other things equal, it is easier for a country to grow fast if it starts out relatively poor, due to giving it an additional unit of capital increases the productivity only slightly if the country already has a large quantity…

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