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The Sources of Economic Development
factors that limit a poor nation’s economic growth includes:
A low level of output in developing nations is due to insufficientquantities of necessary inputs. Developing nations have diverse resource endowments
Congo,for instance, is abundant in natural resources, while Bangladesh is resource-poor. Almost alldeveloping nations have a scarcity of capital relative to other resources, especially labor. Thesmall stock of physical capital (factories, machinery, farm equipment, and other productive
capital) constrains labor’s productivity and holds back national output.
Human Resources and Entrepreneurial Ability Capital
is not the only factor of production required to produce output. Labor is equally important. First of all, to be productive,the workforce must be healthy. Disease today is the leading threat to development in much of the world. In 2009, more than 1 million people died of malaria, almost all of them in Africa. TheGates Foundation has targeted malaria eradication as one of its key goals in the next decade.HIV/AIDS was still responsible for more than 2 million deaths in 2009, again mostly in Africa,and has left Africa with more than 14 million AIDS orphans. Iron deficiency and parasites sapthe strength of many workers in the developing world.
Social Overhead Capital
Anyone who has spent time in a developing nation knows how difficult it can be to carry on everyday life. Problems with water supplies, poor roads, andfrequent electrical power outages
in the few areas where electricity is available
and oftenineffective mosquito and pest control make life and commerce difficult. In any economy,developing or otherwise, the government plays an investment role. In a developing economy,the government must create a basic infrastructure
roads, power generation, and irrigationsystems.Such projects, referred to as social overhead capital, often cannot successfully be undertaken by the private sector. Many of these projects operate with economies of scale, which means they