chapter  11
42 Pages

Economic development

ByJoseph P. Daniels, David D. VanHoose

In the 1950s, development economists noticed an important byproduct of wage increases experienced by residents of developing nations that observed significant growth: As workers' inflation-adjusted wages rose, so did their productivity. The centerpiece of the process of economic development is technological improvement, or an enhanced capability to produce goods and services utilizing an unchanged set of resources. Economic development occurs when such improvements take place widely across a nation's economy. Product innovation also broadens the range of markets for goods and services. This helps to stimulate private business activity, which in turn expands the number of firms offering to employ a nation's residents in income-generating occupations. The key elements of economic development are technological improvement, a broadening of products and markets, and economic growth. Technological improvement refers to the capability to produce more units of goods and services with the same quantities of inputs, which typically arises from innovation in production processes.