Please enable JavaScript.
Coggle requires JavaScript to display documents.
How can market-based supply-side policies impact economic growth and/or…
How can market-based supply-side policies impact economic growth and/or development
Trade liberalization
removal or reduction of trade barriers that block free trade of goods and services between countries. Involve the elimination of tariff barriers, quotas, export subsidies and administrative legislation
Believed to increase world trade and enable developing countries to concentrate on production of goods and services that they have an comparative advantage
Limitation/Challenges
Many developing countries and least developed countries lack infrastructure that are necessary to gain full benefits of trade liberization
Protectionist policies from developed countries can reduce the effectiveness of trade liberalization for developing countries
Subsidies given by the government can damage the competitiveness of their producers in international markets
Privatization
Sale of public government-owned firms to the private sector. it was argued that private-owned firm will be more efficient and increase the potential economy of a country.
Requires careful design and managed well. Hard for developing countries
Some goods and services are necessary to be provided by nationalized firms to make sure that it is accessible and affordable to everyone
If it was privatized, some operation may be shut down as they did not bring profit but it is a necessity
Some example are water and sanitation. Access to safe and affordable drinking water is essential to fight against poverty. If the water sectors was privatized, there is a high chance the price of water will increase and make it difficult for people to have an easy access to it.
Deregulation
If too many regulation were put in place, it may increase the cost of production thus reducing the potential output in the economy. A reduction in the regulation, ie deregulation can help to increase the aggregate supply and generate economic growth.
Too many regulation will deter domestic and foreign investors as it is much harder for a business to start. Reducing this difficulty may increase invesment
Drawback
If the deregulation damage the safety and right of the workers, any benefit in the economic growth are not inclusive
If deregulation in banking system lead to a debt-driven growth, there will be growth at the cost of development
If the deregulation relates to the relaxing of environmental laws, the growth will be at the cost of an unsustainable development