4.9 Barriers to economic growth and/or economic development

Education and health in development

Key to building human capital and improving productivity

Lead to positive externalities like reduced poverty, higher growth, and improved well-being

Positive externalities of education

Improves labor productivity

Reduces unemployment

Increases foreign investment

Promotes gender equity, child health, and social/political stability

Role of credit in development

Links savings to investment

Promotes entrepreneurship

Lifts people from poverty

Microcredit helps poor people without access to formal banking systems

Microcredit benefits

Improves women's empowerment and poverty reduction

Enables small-scale business creation without collateral

Microcredit limitations

Limited reach, high interest, dependency on informal sector

May not replace broader poverty-reduction policies

Empowerment of women

Eliminating discrimination to enable full participation in economic and social life

Improves health, lowers fertility, increases incomes, and supports growth

Education and women

Educated women have healthier children, higher labor participation, and lower birth rates

Improves family income and helps escape poverty cycle

Why inequality is a barrier to development

Low savings and demand, underinvestment in human capital

Political instability and credit inaccessibility for poor

Challenges with infrastructure in ELDCs

Funding issues, low maintenance, misallocation

Environmental degradation, high production costs

Weak taxation systems

Low tax revenue due to corruption, exemptions, and inefficiencies

Reduces funds for development and increases inequality

Import substitution

Growth strategy using trade barriers to protect local industry

Worked temporarily but caused inefficiencies and low growth

Aid effectiveness

Can help escape poverty trap, support SDGs, and improve health, education

Tied aid and conditional aid may be inefficient or harmful

Problems with aid

Donor-driven priorities, poor coordination, misuse by recipient governments

Corruption and inefficiency reduce impact