Economic development is more than GDP growth. It is the structural transformation of economies, the accumulation of human capital, and the evolution of robust institutions that elevate living standards globally.
The classic Lewis model defines development as the reallocation of labor from low-productivity agriculture to high-productivity manufacturing and services. This dual-sector transition is the engine of rapid economic growth.
Historically, manufacturing has demonstrated unconditionally convergent labor productivity. Moving workers off the farm and into the factory creates immediate output gains, driving urbanization and the accumulation of physical capital.
Long-run endogenous growth is driven by ideas and innovation. This requires immense investment in humanity: primarily through robust health systems and quality education.
A healthy workforce is a productive workforce. Reductions in child mortality and managing endemic diseases directly correlate with increased GDP per capita and foreign direct investment.
Moving from primary to secondary and tertiary education shifts an economy toward the technological frontier, enabling adaptation of foreign tech and indigenous innovation.
When fertility rates drop, the ratio of working-age adults to dependents surges. If paired with job creation, this provides a massive but temporary window for accelerated economic growth.
Capital and labor alone cannot explain extreme disparities in wealth. "Institutions are the rules of the game in a society" (North, 1990) and are the fundamental cause of long-run economic growth.
Without secure property rights and unbiased enforcement of contracts, individuals will not invest, innovate, or engage in complex trade. Extractive institutions centralize wealth and inhibit the creative destruction necessary for growth.