Convergence from Above: When Global Catch-Up Reflects Falling Back

IMF Working Papers, July 31, 2026

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Convergence is usually interpreted as evidence of catch-up: poorer economies grow faster because they are moving toward richer ones.
The paper argues the same empirical pattern can arise if country-specific long-run trajectories shift over time, so narrowing income gaps may reflect not only upward movement from below, but also adjustment from above.
Framework developed where economies converge toward evolving rather than fixed steady-state paths; empirical proxies for these paths are constructed using cross-country data.
Main conclusion: economies above their predicted trajectories subsequently grow more slowly and are more likely to move downward within the world income distribution, implying observed convergence partly reflects compression from the top, not only catch-up from below.

Develops a framework in which steady-state paths are evolving rather than fixed.
Constructs empirical proxies for country-specific long-run trajectories using cross-country data.
Uses distribution-dynamics logic to assess how positions relative to predicted trajectories relate to subsequent growth and movement within the world income distribution.

Economies above their predicted trajectories subsequently grow more slowly.
Economies above their predicted trajectories are more likely to move downward within the world income distribution.
Positive overshooting (being above predicted long-run trajectory) is linked to selected downside-adjustment episodes.
Supporting evidence particularly connects positive overshooting to:
- banking-sector distress
- loss of frontier position
The evidence suggests observed convergence partly reflects compression from the top as well as catch-up from below.

Interpretations of global convergence should account for the possibility that narrowing income gaps can reflect downward adjustment among higher-income or frontier economies as well as catch-up by lower-income economies.
Monitoring of country positions relative to evolving steady-state trajectories can provide early indication of downside-adjustment risks, including banking-sector fragility and potential loss of frontier status.