This retards the economic growth of the country (Holis, et al. 2005). To fill the vacuum, there is therefore the need to generate enough external help through foreign aid. The two- gap analysis of foreign aid is that loans, grants, credits must be transferred from developed countries to complement the efforts of developing countries in their development process. The two- gap model explains three processes that countries must pass through to develop.
Another argument refutes the claim that lower taxes for the rich encourage them to invest more which brings about economic growth. In the late 1920s and once again in the earlier part of the last decade, a lot of money was put into speculative investments than productive investments. Hence, increased government spending on improving the labour force and infrastructure through revenue generated from taxes can possibly be more effective than investments in driving economic growth. Now let us look at the other side of the coin – the negative impact of taxation. Taking into consideration other factors such as government spending, business cycle conditions and monetary policy, research has consistently pointed towards the fact that taxes have a significant negative effect on economic
The merits of international trade is that it promotes growth and enhances economic welfare by stimulating more efficient utilisation of factor endowments of different regions and by enabling people to obtain goods from efficient sources of supply. It also makes available to people goods which cannot be produced in their countries. In addition to this it increases real incomes and consumption which in turn leads to expansion of employment and out-put and fosters economic growth. Liberalised trade is responsible for much of the reduction in global poverty. Countries that have embraced liberalised trade policies and increased trade have reduced poverty at a far greater rate than those countries which have maintained high barriers to trade.
Din and Haider(2013) studied the impact of aid on the economic growth of the country. Ramsey Cass Koopman's growth model has been used. Results show that foreign aid has a positive impact on the economy but good governance plays an important role but external debt has a negative role and and is the reason for creating burden on the country Alan(2013) studied the impact of foreign aid on the economic growth of the country. Secondary data has been used where as government spending on education is the independent variable. Results conclude that the lack of management, poor planning and corruption are the reasons because of which aid is not being used
For this reason, disparity in terms of economy increases dramatically just as people who live in underdeveloped countries have many opportunities, just like finding easily workplaces, to live a superior life unlikely people who live in the U.S. lose their workplaces. In the perspective, globalization allows companies and businesses of the U.S. to gain far better earnings; however, this allowance is number one cause of economic inequality. This case leads gap between rich and poor to increase
Yes, Economic growth does lead to a poverty reduction. As at first economic growth is an increase in the amount of goods and services produced per head of the population over a certain period of time, It’s measured as the percent rate of increase in real gross domestic product, GDP and increase in growth is caused by more efficient use of inputs like labor, physical capital or materials which is referred to as intensive growth. Thus, the most functioning way in order to pull the country and the people out of poverty is the economic growth. The strong growth and employment chances for parents, it improve and give more incentives in order to invest more in their children’s education. For example, we will send them to good schools and they will
The innovation of technology is expanding from changing and positively affect the economy. In eras of technological improving, it causes industries to increase their productivity, so the country's economy is growing and improving its financial health (as cited in Moritz,
When firms are optimistic about the future, investment spending increases, and vice versa. Marginal efficiency on investment (MIE) also contributes to the volatility of investment spending in investment. MIE is the expected rate of return over cost of an additional unit of a capital good. When MIE increases, investment spending increases because firms believe that they will get a higher return
Foreign direct investment (FDI) include foreign ownership of productive assets, such as textile factories, mines and land. Due to increasing foreign investment one country can compete an international level and hence FDI is a important measure of increasing globalization. Any shape of Investment brings a progressive outcome in an economy, May on national level or international level. Now a day’s foreign direct investment (FDI) is very important part of international economics. IN case of Pakistan where markets and economy are developing so in this case Pakistan is much need of foreign investment.
(2012) found out that economic aid that is aimed at production sectors and economic infrastructure contributes to economic growth by increasing domestic investment. Technological innovation and industry development are key to achieving economic growth. It is especially through the development of industries that countries are able to diversify their economies and also grow their economies. But the development of these industries and technologies requires large sums of money which Southern Africa does not have. This is where foreign aid becomes essential for Southern African countries to overcome their lack of technical advancement through the assistance of international aid.