GROWTH DIAGNOSTICS

Growth Diagnostics is a decision tree approach for determining a country's most

significant economic growth restrictions. It is also an economic methodology for
identifying private-sector growth restrictions in a national economy or a sector of an
economy. It increases foreign assistance selectivity and focus by providing an explicit,
evidence-based basis for programmatic choices, resulting in higher chances for long-
term reductions in extreme poverty. A growth diagnostic of a country's economy might
be based on a variety of factors: national statistics, cross-country comparisons, and
similarity comparisons nearby countries, international rankings, or business surveys are
all possibilities. Here’s an example of growth diagnostics tree about Low levels of
private investment and entrepreneurship.

INFORMATION EXTERNALITY
Information externality is the overspill of information such as understanding of a
production one firm within the same industry to another without the need for a market
transaction; it reflects the public good characteristic of information and is neither fully
excludable from other uses nor non-rival or the one agent's use of information does not
preclude others from using it. Externalities occur when one economic actor's activities
affect another. Outside of the market system, one economic agent has a direct impact
on another through the circling information. An example, when there’s a new product
that entered the market, the information spreads like wildfire and the information
externality innovators will be able to eventually compete and take away profit from the
original maker of the information.
LINKAGES
Linkages are sales-based ties between companies. A backward linkage occurs
when a company purchases a good from another company to use as an input; a forward
linkage occurs when a company sells to another company. When one or more of the
industries involved offer increasing returns to scale that a broader market can benefit
from, such linkages are especially important for industrialization strategy. Linkages must
be strengthened in order to achieve sustainable and diverse economic development
and reap the benefits of resource-led growth. For example, linkage of countries, when
natural resource extraction is successfully linked to a stable and transparent
governance structure, a low-income economy can use natural resources to 'jump' to a
path of greater and sustainable growth, catching up with middle-income peers and
developing an industrialized, diversified economy.