Section 5.1 Sources of economic growth and/or development - notes
The four elements of economic growth
The sources of growth in a developing economy are no different from those in the advanced industrialised countries. There are four basic requirements, which are:
- Natural resources - land, minerals, fuels, climate; their quantity and quality
- Human resources - the supply of labour and the quality of labour.
- Physical capital and technological factors - machines, factories, roads; their quantity and quality
- Institutional factors - these may include the banking system, the legal system and important factors like a good health care system. We look at this in more detail in Section 5.1.4.
Economic growth is caused by improvements in the quantity and quality of the factors of production that a country has available, i.e. land, labour, capital and enterprise. Conversely economic decline may occur if the quantity and quality of any of the factors of production falls. In this section we look at approaches that developing countries could take to improve the quantity and quality of factors of production.
In this section we consider the following topics in detail:
- Natural factors
- Human factors
- Physical capital and technological factors
- Institutional factors
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