factors that affect growth and development

Question 1

Economic Factors that Affect Growth & Development

Answer 1

investment
education and training
healthcare

Question 2

Economic Factors that Affect Growth & Development explained

Answer 2

investment - Higher savings result in higher investment & economic growth. It is believed that as economies develop, savings increase
Increased savings → increased investment → higher capital stock → higher economic growth → increased savings
If the dependency ratio is high, it means there is less money available for savings & investment

education and training - High levels of education and training increases productivity
Investing in supply-side policy to improve health and education increases the potential output of the country (shifts the production possibility frontier outwards)

healthcare -The level of health directly impacts productivity of labour
Productivity influences output & income
Developed economies tend to have healthy workforces
The less developed the economy, the more sickness & disease there is

Question 3

what are the Barriers to Economic Growth & Development

Answer 3

corruption
institutional factors
lack of infrastructure
human capital
governance
geography
primary commodities

Question 4

Barriers to Economic Growth & Development explained

Answer 4

corruption -Aid or revenue intended for investment can be used by corrupt politicians, resulting in a lower level of investment
Corruption diverts funds to certain groups that have bribed or lobbied officials (e.g. multinational firms) resulting in projects that deliver a low level of growth and development

institutional factors -If government institutions are not functioning, it can be a barrier to growth and development. This includes:
The certainty of a strong legal system attracts investment and builds confidence in an economy
A lack of property rights prevent household assets being used to secure loans or generate income in developing countries
A progressive tax system redistributes from those with higher income to those with lower income and reduces income inequality
Sometimes the benefits of a good progressive tax system are eradicated by weak tax collection and tax enforcement

lack of infrastructure -Good infrastructure reduces business costs and attracts foreign direct investment
This is one reason why China has invested so heavily in infrastructure projects in Asia and Africa as it unlocks economic potential
Some developing countries have such poor infrastructure which makes it difficult to generate economic activity

human capital -Low levels of education and healthcare reduce productivity , Investing in supply-side policy to improve health and education increases the potential output of the country (shifts the production possibility frontier outwards)

governance - Poor governance leads to inefficient use of resources and poor decision-making, If governments keep changing, it results in constantly changing policies & priorities

geography - t is harder for landlocked countries to generate economic growth
Often transportation and administration costs are higher than those with access to ports, which increases the costs of production & decreases international competitiveness

primary commodities- A barrier to growth occurs if country is too dependent on a narrow range of primary commodities