What Are the Different Factors of Economic Growth?

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  • Written By: Peter Hann
  • Edited By: Angela B.
  • Last Modified Date: 09 August 2019
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The factors of economic growth are drivers that lead to an increase in a country's capacity for productivity. These factors may include increased investment in assets and infrastructure to boost the efficiency of production and transportation of goods. Growth also may come from increases in the quantity or quality of inputs to production or innovations to improve the efficiency of productive processes. More efficient exploitation of the land, including natural resources and minerals such as oil and gas, can promote economic growth. Labor and capital are other factors of production that may generate economic growth if their capacity is increased, as are improvements and innovations in technology that may cut the costs of production of existing goods and make possible the invention of new products.

Increased exploitation of the land and natural resources is one of the factors of economic growth. This may promote growth by increasing the potential for production. Many oil-rich countries have achieved a greater level of development by exploiting their mineral resources to increase their national income. The level of growth achieved may, however, depend on how exploitation of resources is managed. For example, if the country remains dependent on one resource, then the growth may eventually slow down; if it successfully diversifies the industrial base, then the country can achieve growth in a number of sectors.


Expanding the quantity and quality of the workforce is another of the factors of economic growth. Education and training policies may improve the skills and productivity of the people, enabling the country to develop high-technology businesses and sophisticated service industries. Many countries also expand their workforce by making it possible for more women to join the workforce, giving a boost to the labor force. If business in a country is to innovate and expand, then the workforce must contribute ideas for innovation, such as by pointing out weaknesses in the production process.

Increased capital investment in a country is another one of the factors of economic growth, provided that it is targeted at productive sectors of the economy rather than propping up unproductive industries. Infrastructure may be developed to enable more efficient transportation of goods within national borders and to other countries. Favorable infrastructure may be created for the development of growth industries in areas such as high technology, information technology and communications.

Another factor affecting economic growth is the efficiency with which the factors of production such as land, labor and capital combine to promote growth. Efficient use of factors of production could be increased by promoting more competition between businesses. Measures to encourage competition include privatization of state industries, deregulation and laws to protect business. For example, laws to protect private ownership of assets, including intellectual property, may lead to increased business confidence and encourage local industries to raise their level of performance.


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Post 6

@Sporkasia-- That's true. There are consequences of economic growth if its not done in an environmentally friendly way. And that seems to be the case in many places. How economic growth is harming nature, as well as animals, would make a very long article by itself.

Post 5

Being reliant on a single resources and not being able to expand production in different goods seems to be story in many places in Africa. My professor was talking about some neighboring African countries that only produce coffee. Since they don't produce anything else, they have to buy all essential goods, including food from other countries. Coffee production is nice but people can't eat coffee.

Post 4

Investment is very important for economic growth indeed. An industry cannot grow without investment, whether it's investment from within the country, or foreign investment. When it comes to foreign investment though, which is vital for many countries, more factors come into play that are not apparent at first glance.

For example, we often hear in the news about how foreign investors pull out of countries where there is conflict or political instability. Investment is reliant on a safe and stable environment. So if at any point, there is political upheaval in a country or violence, the investors start pulling out one by one. No one wants to put their money at risk.

Post 3

It's kind of funny that one of the keys to economic growth is educating people so they can work in more advanced professions where they need technical and computer knowledge, but when this happens you run the risk of losing people to do the simpler jobs.

I grew up in farming country and most people in the community where I lived were employed in agriculture in one way or another. Now many of the field jobs that involve growing and gathering crops are filled by migrant workers from other countries because there are no local people to do the work.

Post 2

I agree with @Sporkasia. I have been reading more and more about fracking, which is a term for a procedure companies use to get natural gas from the ground. I agree that here in the United States natural gas has the potential to be a major factor in economic growth.

We are so dependent on oil from other countries, and we have an abundant supply of natural gas in the ground that we can use and greatly reduce our need for oil. But, with this fracking process, harmful chemicals are pumped into the ground where they may get into our ground water and cause a long list of health problems.

Fracking can also make the ground more susceptible to shifting and earthquakes. It's tough to know when to choose to protect the environment and pass on the economic growth sometimes.

Post 1

This article talks about how learning new ways to use the land and the other resources we have in our environment can lead to economic growth. There is no doubt that we can find ways to use what we have available in our surroundings to create more money and more wealth, but what scares me is how this is affecting the land for future generations, and how in some cases we are actually creating health risks because of the way we drill for energy sources or the way we clear the land.

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