Impact of Economic Growth

Economics: Edexcel A A Level, topic 3.5.4

Costs and Benefits of Economic Growth

Economic growth has many potential positives and negatives for individuals, the economy and the environment.

Economic growth has many potential positives for individuals, the economy and the environment. These include:
Rising incomes leads to better living standards.
Better job prospects.
Less unemployment.
Affordability of goods and services.
Better access to healthcare and education.
Higher tax revenue (“the fiscal dividend”), which can be spent on merit goods such as hospitals and schools, as well as public goods such as infrastructure.
Higher international competitiveness.

Some negatives include:
Environmental concerns: growth can give rise to negative externalities, such as pollution.
Unsustainable: growth at the expense of future generations by using up natural resources, such as minerals.
Wealth and income inequality: rapid growth can benefit cities more than rural areas, or more skilled workers who have negotiating power with wages.
Inflation: rapid growth can put pressure on resources and lead to prices rising too quickly (inflation).