Goldman Sachs argued in a report released Monday that the narrative of slowing economic convergence between developing and advanced economies may be misleading, largely because many analyses fail to consider differences in population size.
According to the bank, measuring convergence on a population-weighted basis reveals that poorer economies have been steadily narrowing the income gap with wealthier nations since the 1980s, rather than only during the decade between 2000 and 2010 as some research has suggested.
Asia’s Largest Economies Have Been the Main Growth Engine
The report identified several of Asia’s most populous countries as the primary contributors to long-term economic convergence.
China has been a major driver of the trend since the early 1980s, while India, Indonesia and Bangladesh have played increasingly important roles since the late 1990s.
Collectively, these four nations account for more than 40% of the world’s population, giving their economic progress a substantial influence on global convergence measures.
United States Continues to Stand Out Among Advanced Economies
Within the developed world, Goldman Sachs highlighted the United States as an exceptional performer.
Despite already having one of the highest levels of GDP per capita globally, the U.S. has continued to generate stronger per-capita economic growth than most other advanced economies.
The bank noted that this combination of high income levels and robust growth makes the U.S. a notable outlier among mature markets.
Globalization Has Favored Different Economies in Different Ways
Goldman Sachs observed that periods of rapid globalization, particularly between 2000 and 2010, provided significant benefits for smaller economies that lacked large domestic consumer markets.
However, the report suggested that large emerging economies, especially those located in East Asia, have demonstrated a more durable pattern of convergence that extends beyond periods of peak globalization.
This resilience has allowed many major emerging markets to continue closing the gap with developed economies even as global trade dynamics have evolved.
Emerging Markets Expected to Gain a Larger Share of Global Output
The continued convergence trend implies that emerging economies are likely to account for an increasing proportion of global economic activity in the years ahead.
Goldman Sachs believes that East Asian emerging markets in particular are positioned to capture a growing share of world GDP as their economies continue to expand faster than many developed counterparts.
Artificial Intelligence and Protectionism Could Shape Future Outcomes
Looking ahead, the bank identified several factors that could influence the pace of convergence.
The development and adoption of artificial intelligence could provide a meaningful boost to productivity and economic growth in the United States and parts of East Asia, including China, South Korea and Taiwan.
At the same time, rising protectionist policies could weaken the forces of globalization that have historically supported economic convergence.
Goldman Sachs also warned that climate change represents a significant long-term challenge, particularly for countries in South Asia and parts of Africa, where economic development may be more vulnerable to environmental pressures.