Initially, the number of tools per worker was higher in Sporon than in Gobbledigook. From 2017 to 2037, capital per worker rises by 5 units in each country. The 5-unit change in capital per worker causes productivity in Sporon to rise by a smaller amount than productivity in Gobbledigook. This illustrates the catch-up effect. True or false?

The statement is true. Initially, the number of tools per worker was higher in Sporon than in Gobbledigook. From 2017 to 2037, capital per worker rises by 5 units in each country. The 5-unit change in capital per worker causes productivity in Sporon to rise by a smaller amount than productivity in Gobbledigook. This illustrates the catch-up effect.

Explanation:

The catch-up effect describes the following observation: If one starts from a given starting point, poor economies tend to achieve faster economic growth than richer countries.  

According to the catch up effect, an approximation (catch up) of the per capita income of economies takes place due to different initial values of capital intensity. The followers (poorer economies) have a lower capital intensity than leaders (richer economies) and thus there is a potential catch-up for the followers, as the growing percentage will be higher if they grow in the same numbers.

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