Question

1.

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

2.

Discuss the constraints of growth in Europe vs. the United States.

(Explain in terms of productivity/technology/labor)

(Baumol/Blinder textbook has lots of information on this topic)

Answer 1

1.
There are different factors that make some countries to lag others economically. The first factor is lack of proper economic policies and planning. Due to poor policies, the countries don’t get benefited from the resources at their disposal and remain laggard to the other progressive economies. It also reflects poor government commitment to the economic development of the country. The second factor is inefficient utilisation of available resources at their disposal. When there is a case of economic rent, infighting for the ownership of resources and bribe culture, then resources are not utilised properly and economic development does not take place properly. For example, many African nations don’t achieve higher growth rates even if they have abundance of natural resources at their disposal. The third reason is the political instability. It makes country to be vulnerable and foreign investors and MNCs don’t show interest to operate in these markets due to the fear of higher risk of sinking their capital. It makes countries to lag behind other economies. The fourth factor is the lack of regulatory framework that makes existing enterprises to exploit the economy and never let the domestic economies grow. It benefits to the outsiders more than the local economic development. Hence, growth suffers in these economies.
So, there are the factors that make some countries to lag others economically.

Pl. repost other unanswered questions for their proper answers!