Question

1. Why do some countries lag others economically? (Explain 4 factors)

Answer 1

1. Following are four important factors:

1) Resource difference: Different countries have different levels of resources because of which they achieve a different level of economic growth and development.

2) Human capital: Human capital includes ideas, skills, capabilities, etc. of people which help in producing economic output. Some countries develop human capital faster and more effectively through investment in education and training while some other countries hardly have any human capital development plan.

3) Infrastructure: Economic growth cannot take place without having enabling infrastructure. Infrastructure needs investment, which in turn needs resources. The difference in the level of infrastructure such as roads, ports, electricity generation capability, etc. make different countries grow differently.

4) Government and institutions: A country needs stable government as well as effective government policies to grow economically. Also, economic growth needs enabling institutions such as the banking system, financial system, etc. Most poor countries have an ineffective and corrupt government and lack of proper institutions.