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Factors that Contribute to Economic Development

Factors that Contribute to Economic Development

Economic development has become an increasingly popular area of research in recent years, as countries worldwide continue to search for innovative ways to boost their Gross Domestic Product (GDP). Researchers have identified several factors that contribute to economic development. This article highlights some of these factors:

Capital/technology

The availability of capital is necessary for production. There must be a certain amount of investment from local and foreign investors to contribute to an efficient market sector and proper infrastructure for the general population. That can come from many forms, including loans from governmental agencies or programs such as the International Monetary Fund (IMF), international aid programs, or incentive-based lending plans, which provide reduced interest rates or easier credit terms if a recipient meets certain conditions.

The other contributor would be foreign direct investments (FDI), in which companies gain a foothold in another country. For instance, a positive externality of FDI is that it provides capital and new technology, management techniques, and business practices that assist the FL Economic Development to boost its production potential.

Infrastructure

A well-developed infrastructure is essential for both internal and external trade. Countries with poor or lacking infrastructure may be unable to meet the needs of businesses within their territory. Internal transportation (roads, railroads, waterways) and external connections (internet/phone service providers) are vital for expanding its market reach beyond an immediate local area. In addition, not having those connections can also cause problems from a social standpoint, because numbers of people could have difficulty reaching certain areas such as hospitals or other public places that require a specific model or standard of transit to access them. As a result, these facilities would be limited only to those who can afford personal forms of transport, leaving the rest of the population at a disadvantage.

Market Access

A business must first look to its own country for domestic consumers and take into account trade with other nations because it is not enough to satisfy local demand. It can often be beneficial if there are reduced tariffs or other economic barriers that have been enacted between different countries because it allows businesses to expand their market potential by exporting goods/services abroad. That broadens the range of consumers that an organization regularly deals with, which has many benefits, including increased revenue potential, cross-cultural awareness, and sharing of ideas. Further, the market should make logistical sense to allow companies to tap new markets, so they do not become over-reliant on one region or consumer group, leading to decreased sales and revenue if there is a shift in the economy.

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