Region: Harare semester: 1
) Discuss any five causes of law ecomic growth in many 3
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| 2) Discuss any five causes of law ecomic growth in many 3 rd world countries . Economic growth of a country is the increase in the market value of the goods and services produced by an economy over over a period of time. It is measured by the increase in a countries Gross Domestic Product (GDP) increase in the total value of all final goods and services produced within a country over a period of time as shown by an outward shift in the PPC Economic growth is one of the most important indicators of a healthy economy. One of the biggest impacts of long-term growth of a country is that it has a positive impact on national income and the level of employment, which increases the standard of living. As the country’s GDP is increasing, it is more productive which leads to more people being employed however low economic growth is an economy in which growth is slow to negligible in macroeconomic terms for example in the 3 rd world countries, which also known as developing countries because of less developed industrial base and a low Human Development Index relative to other countries. However, this definition is not universally agreed upon. The following are some of the causes of law economic growth. Political Instability According to A Alesina et al (1996) they define it as the propensity of a government collapse , and we estimate a model in which such measures . when there is political instability in a country it scaresinvestors away and this hinders investmet sor instance Zimbabwe had been plagued with political uncertainity and the laws were favouring indegeneous ownership , this scared off many investors away. The link between political instability and economic growth according Fosu,( 2001) suggest that political instability is detrimental to economic performance in developed as well as in developing economies. For example, Alesina et al. (1996) used the GDP per capita growth rates and the changes in government to measure political instability as a dependent variable. Political instability hinders productivity of an economy especially if it is of a violent nature , the transactional capacities of a country also decreases . Political instability results in low economic growth because it affects a lot of things which includes the tax system, government spending and fiscal deficit and inflation , these instruments affects the level of investment furthermore political instability often cuts foreign direct investment (Alfaro et al (2008)) and usually causes high inflation rates . Alesinaet al (1996) in theory argued that an unstable political environment produces uncertainity which negatively impacts private investments , physical capital accumulation and therefore economic growth . However low or week economic performance can lead to a collapse of the government and hence political instability will result because growth could motivate structural changes that undo polical alliances and bring painfall readjustments in the balance of power among different interest groups. Lack of Infrastructure Inflacture refers to the structures , facilities and systems that contribute to the function of a country ie roads ,bridges ,airports power supplies. Inflactucture of an econmy is directly linked to the economic growth of that country . I nfrastructure is basically the base in which economic growth is built upon. Roads, water systems, mass transportation, airports and utilities are all examples of infrastructure. It covers those supporting services that help the growth of directly productive activities like agriculture and industry. These services include a wide range starting from the provision of health services and education facilities to the supply of such need as power, irrigation, transport, communication, etc. Poor inflastructure contributes to economic growth by icreasing economic productivity and provision of services. When there is poor inflastructure in a country , the chain of production is disrupted , this will inturn hinder the GDP of that country for instance when a country has poor or in adequate roads , there will be reduced ability to access high quality inputs and also a limit to the users of local markets to sale their products . Output of infrastructure sectors such as power, water, transport, etc. are used as inputs for production in the directly productive sectors, viz. agriculture, manufacturing, etc. Therefore, insufficient availability of the former results in sub-optimal utilisation of assets in the latter hence negative economic growth. Furthermore poor inflastructure ie problem with power supply and water affect production in an economy because they are not unrelable but also inefficient,expensive and hence slows economic growth. Studies have also revealed that generally around 6.5 per cent of the total value added is contributed by infrastructure services in low income countries. This proportion increases to 9 per cent in middle income countries and 11 per cent in high income countries. Thus given the above type of linkage, infrastructural development is important not only for economic growth but also for poverty reduction. Lack of real capital Real Capital or Economic Capital comprises physical goods that assist in the production of Download 212.83 Kb. Share with your friends:
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