The factors of economic growth are drivers that lead to an increase in a country's capacity for productivity. These factors may include increased investment in assets and infrastructure to boost the efficiency of production and transportation of goods. Growth also may come from increases in the quantity or quality of inputs to production or innovations to improve the efficiency of productive processes. More efficient exploitation of the land, including natural resources and minerals such as oil and gas, can promote economic growth. Labor and capital are other factors of production that may generate economic growth if their capacity is increased, as are improvements and innovations in technology that may cut the costs of production of existing goods and make possible the invention of new products.
Increased exploitation of the land and natural resources is one of the factors of economic growth. This may promote growth by increasing the potential for production. Many oil-rich countries have achieved a greater level of development by exploiting their mineral resources to increase their national income. The level of growth achieved may, however, depend on how exploitation of resources is managed. For example, if the country remains dependent on one resource, then the growth may eventually slow down; if it successfully diversifies the industrial base, then the country can achieve growth in a number of sectors.
Expanding the quantity and quality of the workforce is another of the factors of economic growth. Education and training policies may improve the skills and productivity of the people, enabling the country to develop high-technology businesses and sophisticated service industries. Many countries also expand their workforce by making it possible for more women to join the workforce, giving a boost to the labor force. If business in a country is to innovate and expand, then the workforce must contribute ideas for innovation, such as by pointing out weaknesses in the production process.
Increased capital investment in a country is another one of the factors of economic growth, provided that it is targeted at productive sectors of the economy rather than propping up unproductive industries. Infrastructure may be developed to enable more efficient transportation of goods within national borders and to other countries. Favorable infrastructure may be created for the development of growth industries in areas such as high technology, information technology and communications.
Another factor affecting economic growth is the efficiency with which the factors of production such as land, labor and capital combine to promote growth. Efficient use of factors of production could be increased by promoting more competition between businesses. Measures to encourage competition include privatization of state industries, deregulation and laws to protect business. For example, laws to protect private ownership of assets, including intellectual property, may lead to increased business confidence and encourage local industries to raise their level of performance.
