The logic behind the catch-up effect is that:

• A. countries with higher initial levels of capital always experience higher growth rates
• B. economic growth is independent of a country's initial capital stock
• C. countries with lower initial levels of capital tend to grow faster than those with higher initial levels of capital
• D. all countries grow at the same rate regardless of their starting point

Answer: (C)

Verified step by step guidance

1. Understand the concept of the catch-up effect in economic growth theory, which suggests that poorer countries (with lower initial capital stock) tend to grow faster than richer countries.
2. Recognize that this effect occurs because countries with less capital can adopt existing technologies and practices from more developed countries, leading to higher marginal returns on investment.
3. Recall the Solow growth model, where the marginal product of capital diminishes as capital stock increases, implying that countries with lower capital have higher potential growth rates.
4. Analyze the given options and identify that the catch-up effect contradicts the idea that all countries grow at the same rate or that growth is independent of initial capital stock.
5. Conclude that the correct interpretation of the catch-up effect is: countries with lower initial levels of capital tend to grow faster than those with higher initial levels of capital.