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3. Market Based Supply Side Policies - Coggle Diagram
3. Market Based Supply Side Policies
Trade Liberalization
Reduction or removal of trade barrier which block free trade of goods and services between countries
Elimination of tariff barriers, quotas, export subsidies and administrative legislation
Advantages:
Increased world trade
Concentration on the production of goods and services which have a comparative advantage
Least Developed Countries:
Lack infrastructure and institutions
Protectionist policies by developed countries block exportation of Higher value manufactured goods and reduce effectiveness of trade liberalization
Subsidies can also damage ability of developing countries to compete in International Markets
Challenges developing countries face undermine the need for international cooperation through aid-for-trade strategies
Privatisation
Sale of public gov. owned to firms to private sectors
Requires careful:
Design and sequencing
Creation of regulatory infrastructure
Assessment of possible poverty
Social impacts
Transparent Public Communication
Certain Goods and Services should be provided by nationalized firms:
Privatization may lead to closure, as no profit making and unaffordable prices
Case: Provision of Water and Sanitation
Left purely to market forces , lack of competition and regulation and if privatized, gov must ensure regulations are imposed
Private-owned:
More efficient
Increase potential output of country
Nationalized firms:
Goals of maintenance and employment and service
Operate inefficiently
Deregulation
Increase Aggregate Supply
Generate Economic Growth
Reduce difficulty of process may increase investment
( Existence of Red Tape )
World Bank: Ease of Doing Business Index
Measures how simple it is to conduct business in a country
Through the gap between an economy's performance and a measure of best practice across 41 indicators for 10 doing business topics
Drawbacks / Detractors:
1) Implementation to attract investment but damages safety and rights of workers - benefits to economic growth will be inclusive
2) Debt driven government - growth at cost of development
3) Relaxation of environmental loss - Growth at cost of sustainable development
