540PART NINETHE REAL ECONOMY IN THE LONG RUNThis catch-up effect shows up in other aspects of life. When a school gives anend-of-year award to the “Most Improved” student, that student is usually onewho began the year with relatively poor performance. Students who began theyear not studying find improvement easier than students who always workedhard. Note that it is good to be “Most Improved,” given the starting point, but it iseven better to be “Best Student.” Similarly, economic growth over the last severaldecades has been much more rapid in South Korea than in the United States, butGDP per person is still higher in the United States.INVESTMENT FROM ABROADSo far we have discussed how policies aimed at increasing a country’s saving ratecan increase investment and, thereby, long-term economic growth. Yet saving bydomestic residents is not the only way for a country to invest in new capital. Theother way is investment by foreigners.
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