Explain poverty cycles and the economic, political and social barriers that hold back growth and development, draw a poverty cycle, and evaluate which barriers matter most in a given country.
Each is in the Economics glossary, with every other term in the subject.
The ability of a country's producers to sell goods and services abroad, which depends on transport costs, other countries' trade barriers, product standards, information and export infrastructure.
Technology suited to local economic, social and environmental conditions, typically affordable, labour-intensive, easy to maintain with local skills and materials, and usable without complex energy or parts supplies.
The emigration of skilled and educated workers, such as doctors, nurses, engineers and graduates, from a country to work abroad, reducing the human capital available at home.
The large-scale transfer of money and financial assets out of a country by residents or investors, often because of political or economic instability, expected depreciation, high taxes or the wish to hide illicit wealth.
A situation in which a country relies on one or a few primary commodities for a large share of its export earnings, output or government revenue, leaving it exposed to swings in world commodity prices.
The abuse of public office or entrusted power for private gain, such as bribery, embezzlement of public funds, or giving contracts and jobs to friends and relatives.
The decline of other export and import-competing industries, especially manufacturing, after a natural resource export boom raises the exchange rate and draws labour and capital into the resource sector.
Explain what a poverty trap is and why poverty can persist from one generation to the next.
Draw a poverty cycle diagram and use it to explain how low incomes, low saving, low investment and low productivity reinforce each other.
Explain the economic barriers to growth and development: inequality, infrastructure and technology, human capital, primary-sector dependence, market access, the informal economy, capital flight, indebtedness, geography and disease.
Explain the political and social barriers: a weak institutional framework, poor governance and corruption, gender inequality and unequal political power.
Calculate the effect of a commodity price change on export revenue, and the burden of debt service, from given data.
Explain how barriers interact, so that one barrier makes others worse.
Evaluate the relative significance of different barriers for a particular country, using real-world evidence.
Some economies have grown fast for decades while others have stayed poor. The factors that stop an economy from raising its output, or stop higher output from improving people’s lives, are called barriers to economic growth and economic development. Knowing which barriers matter most in a country is the first step in choosing a strategy to overcome them.
Barriers are where several key concepts meet. Most barriers keep resources scarce or badly used, which lowers efficiency; many are questions of equity, because the people held back are often the poorest, women or those far from political power; and almost all of them involve interdependence, because a poor country’s prospects depend on world prices, foreign lenders and foreign markets.
147 exam-style questions on this subtopic, written in the style of the IB papers. The first has its markscheme open. Counted on
Natural disasters and armed conflict can cause severe damage to a country's economy.
Using a production possibilities curve (PPC), explain how a major natural disaster could affect both an economy's production possibilities and its actual output.
10 marks
Answers may include:
Terminology: definitions of PPC, factors of production, growth in production possibilities (and its reverse), actual output, unemployment of resources.
Explanation: a disaster destroys capital (buildings, roads, machinery), damages land and may kill or displace workers, reducing the quantity of factors of production; the PPC shifts inward, so the economy can produce less of both goods; in addition, disrupted transport, power and supply chains leave surviving resources idle, so actual output falls to a point inside the new PPC; reconstruction can bring idle resources back into use (actual growth) and, over time, rebuild the capital stock (outward shift).
Diagram: a PPC shifting inward from PPC₁ to PPC₂, with the economy moving from a point on PPC₁ to a point inside PPC₂.
A maximum of [6] should be awarded if only the effect on production possibilities or only the effect on actual output is explained.
Markbands (best fit)
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One of 50 short multiple-choice questions on 4.9. Pick an answer to see why it's right or wrong.
A charity gives every household in a poor village a one-off cash payment, which is spent on food within a month. Why is this unlikely to lift the village out of its poverty trap?
The official deck for this part of the syllabus.
What are barriers to economic growth and development?
Why is it useful to identify which barriers matter most in a country?
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A disease that is constantly present in a population or region, such as malaria in much of sub-Saharan Africa, reducing health, working capacity and school attendance year after year.
Unequal treatment of, or opportunities for, people because of their gender, for example in education, health care, employment, pay, property, finance and political power, usually to the disadvantage of women and girls.
The exercise of political authority in a way that is accountable, transparent, effective and responsive to citizens, with the rule of law, protected rights and low corruption.
The condition of owing large debts, especially foreign-currency debt to foreign lenders, whose interest and repayments take a large share of a country's income, export earnings or government revenue.
The formal and informal rules and organisations, such as the legal system, property rights, tax system, banking system and civil service, within which economic activity takes place.
A country with no coastline, whose foreign trade must pass by land through at least one neighbouring transit country to reach a seaport.
Legally recognised and enforceable rights of individuals and firms to own, use, sell and earn income from assets such as land, buildings and businesses.
The principle that everyone, including the government, is subject to the same known laws, enforced fairly and predictably by independent courts.
Economic growth is an increase in real output, usually measured as the percentage change in real GDP over a year. Economic development is broader: a lasting improvement in people’s well-being, including higher incomes, better health and education, more freedom and choice, less poverty and fairer opportunities. Growth usually helps development, because it provides the income and tax revenue that pay for schools, clinics and infrastructure, but it does not guarantee it.
This difference matters when barriers are studied. Some barriers mainly hold back growth, for example a shortage of electricity that stops factories from producing. Others mainly hold back development even when growth is fast, for example rising inequality that keeps the gains in a few hands, or gender inequality that keeps girls out of school. Many barriers do both.
In macroeconomic terms, most barriers limit an economy’s productive capacity, its potential output. They keep the quantity or quality of the factors of production low, or stop them from being used efficiently. On an AD/AS diagram they hold the long-run aggregate supply (LRAS) curve far to the left. When a barrier is reduced, for example by building a power station, curing a disease or enforcing contracts in court, LRAS shifts to the right.
The diagram shows the long-run effect. If AD stays the same, the economy moves along AD to a higher real GDP and a lower price level. In practice AD usually rises at the same time, because the new capacity creates jobs and incomes, so the typical result is growth without strong inflation. The same idea can be shown as an outward shift of the production possibilities curve.
A poverty trap exists when poverty creates conditions that keep people poor. The causes of poverty and its consequences feed each other in a loop, so a household, a region or a whole economy cannot escape on its own. The idea explains why poverty persists across generations, and why one-off help often has only a temporary effect.
At the level of a household, the trap works through daily choices. A family with an income close to subsistence spends almost all of it on food, rent and fuel. Little is left to save, to buy better seeds or tools, or to keep children in school rather than at work. The family’s productivity stays low, so its income stays low, and the next generation starts from the same position.
At the level of the whole economy, the same loop works through national saving and investment. Low national income means low national saving, so there are few funds to finance investment in capital goods. With little capital per worker, labour productivity is low, so national income stays low. Government revenue is also small, so the state cannot afford the roads, schools and clinics that would raise productivity.
A poverty cycle diagram is a flow diagram that links the factors keeping poverty going, with arrows showing the direction of cause and effect. There is no single correct version: any set of factors is acceptable if each arrow is a real causal link and the loop closes back on low incomes. The version shown has two loops, one through physical capital and one through human capital.
The left loop is the classic savings-and-investment cycle. Low incomes leave little saving; little saving means little investment in machinery, tools and land improvements; a small stock of capital means low output per worker. The right loop is the human capital cycle. Low incomes mean poor nutrition, little health care and short schooling; workers are less healthy and less skilled; their productivity is low. Both loops meet at low productivity, which feeds back into low incomes.
Other versions of the cycle are equally valid. A rural version might run from low incomes to the need to farm every piece of land, to soil exhaustion, to lower crop yields and back to low incomes. A demographic version might run from low incomes to high child mortality, to large families as insurance, to less spending per child on education and back to low incomes. Choosing the version that fits the country in a question earns more credit than a generic one.
Because the loop is self-reinforcing, small or temporary changes may not be enough. An income gain that is spent within a month leaves the household where it started. To escape, a household or an economy usually needs a change large enough, or lasting enough, to raise saving and investment permanently: a road that cuts transport costs, a vaccination programme, a new export industry or a land title that can be used as security for a loan.
External help can provide this push. Foreign aid, inward foreign direct investment, remittances from family members working abroad and debt relief all add funds that domestic saving cannot provide. Government spending on merit goods such as education and health care breaks the human capital loop directly. These strategies, and their limits, are the subject of growth and development strategies.
YouTubeEconomic barriers are features of an economy’s resources, markets and links with the rest of the world that hold back growth or development. They are grouped here for clarity, but in any real country they overlap.
Economic inequality is the uneven distribution of income and wealth. Some inequality gives people incentives to work, train and invest. When inequality is very high or rising, however, it becomes a barrier to development, and often to growth as well.
High inequality slows development directly, because the gains from growth go mainly to the richest households, so poverty falls slowly even when GDP rises. It also slows growth indirectly. Poor households cannot borrow to pay for education or to start a business, so the talents of a large share of the population are wasted. Very unequal societies also tend to have weaker political consensus, more social conflict and policies shaped by a wealthy minority.
Southern Africa has some of the highest measured inequality in the world. South Africa’s Gini coefficient was 54.1 in 2022 and Zambia’s 51.5, compared with 30.9 in Bangladesh and 36.1 in Viet Nam in the same year. Growth in a very unequal economy reduces poverty less than the same growth in a more equal one, because a smaller share of each extra dollar reaches the poor.
Sources: World Bank, Poverty and Inequality Platform, via World Development Indicators SI.POV.GINI (2026).
Infrastructure is the physical capital an economy needs to function: roads, railways, ports, power, telecommunications, and water and sanitation. Without it, firms face high costs and cannot reach markets, workers spend hours travelling or fetching water, and new technology cannot be used.
Electricity is the clearest example. In 2024 only 5.4% of people in South Sudan, 13.4% in Chad and 15.6% in Malawi had access to electricity, against almost 100% in Viet Nam, India and Bangladesh. A business without reliable power must run a diesel generator, which raises costs and makes it uncompetitive; a student without light cannot study after dark; a clinic cannot keep vaccines cold. Poor sanitation and unsafe water spread disease, which links infrastructure directly to human capital.
Sources: World Bank, World Development Indicators EG.ELC.ACCS.ZS (2026).
Infrastructure has features of a public good and creates large positive externalities, so private firms supply too little of it. It is also expensive and slow to build, which makes it hard for governments with small tax revenues to provide. This is why infrastructure gaps often persist in the poorest countries, where they do most harm.
Technology raises productivity, but only if it suits local conditions. Machinery designed for rich countries, where labour is expensive and capital is cheap, may be the wrong choice in a country with many workers, little capital, unreliable power and few engineers to repair it.
Examples of appropriate technology include treadle pumps for irrigation, solar lanterns and home solar kits where there is no grid, mobile phones used for payments, and hand-operated grain mills. A lack of access to such technology, because of cost, lack of information or poor distribution, keeps productivity low. Expensive capital-intensive technology can also make development less equal, because it creates few jobs while many people remain underemployed.
Human capital is the skills, knowledge, health and experience of the labour force. It is the "quality" of labour, and it is one of the most important sources of long-run productivity growth. Low human capital is both a cause of poverty and a result of it, which is why it sits at the heart of the poverty cycle.
Poor health reduces the number of days people can work, their strength and concentration while working, and how long they live to use their skills. Ill children miss school and learn less. Families that spend their savings on medical bills cannot invest. Where health care is far away or expensive, treatable illnesses become disabling ones.
Without education, workers cannot use modern technology, read instructions, keep accounts or move into higher-productivity jobs in manufacturing and services. Education also improves health, because educated parents use clinics, vaccinate their children and have smaller families. Where schools are far away, charge fees or are of low quality, poor families keep children at home or at work, and low human capital passes to the next generation.
Health care and education are merit goods: their benefits to society are greater than the benefits that individuals take into account, and people on low incomes cannot afford enough of them. Markets alone therefore under-provide them, and the gap is largest where incomes are lowest.
Brain drain makes a shortage of human capital worse. A country that trains doctors at public expense and then loses them to higher wages abroad bears the cost of their education without the benefit of their work. Brain drain has a partial offset in remittances sent home, and some emigrants return later with new skills and contacts, so its net effect depends on how many leave and how many come back.
Many low-income economies depend on the primary sector: agriculture, mining, fishing and forestry. Their exports are concentrated in a few primary commodities, such as copper, cocoa, coffee or crude oil. Dependence on primary production is a barrier for several connected reasons.
Commodity dependence can be extreme. In 2024 fuels made up 88.6% of Nigeria’s merchandise exports and 94.3% of Angola’s, while ores and metals made up 73.0% of Zambia’s. When one product earns most of a country’s foreign currency, the whole economy rises and falls with its world price.
Sources: UN Comtrade and World Bank staff estimates, via World Development Indicators TX.VAL.FUEL.ZS.UN and TX.VAL.MMTL.ZS.UN (2026).
Primary commodities have a low price elasticity of demand and a low price elasticity of supply, especially in the short run. Demand is price-inelastic because commodities such as copper, oil or food have few substitutes and are a small share of the final price of the goods made from them. Supply is price-inelastic because a new mine takes years to open and a tree crop years to bear fruit. When demand or supply shifts, the adjustment falls mostly on price, not quantity. This is commodity price volatility.
The left-hand panel shows a primary commodity with steep demand and supply curves. A fall in demand, for example when China’s construction slows and it buys less copper, moves the equilibrium along the steep supply curve, and the price falls by a large amount while the quantity hardly changes. The right-hand panel shows a manufactured good with flatter curves: the same shift changes quantity more and price much less. Export revenue, government revenue and the exchange rate of a commodity-dependent economy therefore swing widely, which makes planning, investment and borrowing risky.
Few links to the rest of the economy. A modern mine or oil field uses a lot of capital and imported equipment but employs relatively few people, so growth in the sector creates few jobs and little demand for local suppliers.
Little value added. Exporting raw copper or cocoa beans earns far less than exporting wire or chocolate. The processing, and the skilled jobs that go with it, happen in importing countries.
Weak long-run demand for some commodities. As world incomes rise, spending on many food commodities grows less than in proportion to income (their income elasticity of demand is low), while spending on manufactures and services grows faster.
Exposure to weather and disease. Crop exports can be wiped out by drought, floods or plant disease, which makes incomes in agricultural economies unstable.
The name Dutch disease comes from the Netherlands in the 1960s and 1970s, when natural gas exports raised the value of the guilder and made Dutch manufacturing less competitive. In a developing economy, a commodity boom can have the same effect: the currency appreciates, farming and manufacturing exports become too expensive, and the economy becomes even more dependent on one commodity. When the boom ends, the industries that could have provided an alternative are gone. The broader observation that resource-rich countries often grow more slowly or develop less than resource-poor ones is sometimes called the "resource curse"; weak institutions and corruption around resource revenue are part of the explanation.
Trade lets a country sell more than its own small market can buy, specialise in what it does best and earn the foreign currency it needs to import capital goods. Many low-income countries find it hard to reach foreign buyers.
Access to international markets is limited in several ways. Rich countries’ tariffs on processed goods are often higher than on raw materials, which discourages poor countries from processing their own commodities. Agricultural subsidies in rich countries lower world prices for crops such as cotton and sugar, so farmers in poor countries earn less. Strict food-safety and product standards are often justified but costly to meet for small producers. And poor roads, slow customs and few shipping links raise the cost of trading even where tariffs are low.
The informal economy is the part of the economy that is not registered with, regulated or taxed by the government: street traders, small farms, home workshops, casual labourers and many small family businesses. In many low-income countries it employs most workers. A related measure, vulnerable employment (people who work on their own account or as unpaid family workers), was about 72% of employment in India and 70% in Zambia in 2025.
Sources: ILO modelled estimates, via World Bank World Development Indicators SL.EMP.VULN.ZS (2026).
A large informal sector is a barrier because informal firms stay small. Without legal registration they cannot borrow from banks, sign enforceable contracts, win government contracts or sell to large foreign buyers, so they rarely grow or invest. Their workers lack protection against accidents, illness and old age. The government collects little tax from them, which limits what it can spend on infrastructure and services. The informal economy is also a symptom of other barriers: complex regulation, high costs of registering a business and weak property rights all push people into it.
The informal economy also provides a living for millions of people who would otherwise have no income, and it can be a source of enterprise and flexibility. Policy that simply bans it can do harm. The development aim is usually to make formality worthwhile, through simpler registration, lower costs and the benefits of credit and legal protection.
Development needs investment, and investment needs saving. Capital flight is a leak in that process: money that could finance investment at home is moved abroad.
Capital flight can be legal (buying foreign assets) or illegal (smuggling cash, mis-pricing trade invoices, hiding the proceeds of corruption in foreign bank accounts). Either way, it reduces domestic saving available for investment, cuts the government’s tax base and can push down the exchange rate.
The amounts can be very large. One estimate puts capital flight from 33 sub-Saharan African countries at $814 billion (in constant 2010 US dollars) between 1970 and 2010, more than the official aid ($659 billion) and foreign direct investment ($306 billion) they received over the same period. Including the interest it would have earned, the stock of flight capital in 2010 was about $1.06 trillion, more than five times these countries’ combined external debt of $189 billion.
Sources: Boyce and Ndikumana, _Capital Flight from Sub-Saharan African Countries: Updated Estimates, 1970–2010, PERI, University of Massachusetts Amherst (2012)._
Capital flight is linked to other barriers. Corruption creates wealth that its owners want to hide abroad; weak property rights and unstable politics make wealthy people fear for assets held at home; and a debt crisis or expected devaluation encourages everyone with savings to move them into foreign currency.
Borrowing can help development if the money finances investment that raises output by more than the cost of the loan. Many low-income countries, however, have built up debts that they struggle to service, a condition known as indebtedness.
External debt is usually owed in a foreign currency such as US dollars. To pay it, a country must earn foreign currency through exports or borrow more. The cost of servicing the debt, the interest and repayments, is a transfer of resources out of the country that cannot be used for health, education or infrastructure. This is the opportunity cost of debt.
The figure shows how debt can become a trap of its own. High debt service leaves less for public investment, so growth, exports and tax revenue grow slowly, so the government borrows again to cover deficits and repayments. If investors start to doubt that the debt will be repaid, they demand higher interest rates, which raises debt service further. A depreciation of the currency increases the local-currency value of foreign debt overnight. The cycle can end in a sovereign default, which cuts the country off from new lending for years.
Geography affects transport costs, climate and disease. None of it can be changed, but its effects can be reduced.
There are 32 landlocked developing countries, and 16 of them are among the least developed countries in the world. Their exports and imports must travel long distances by road or rail, cross at least one border and depend on the ports, roads and policies of a neighbour. Afghanistan, Chad, Niger, Zambia and Zimbabwe are each more than 2 000 km from the nearest coast.
Average cost of trading one container (2014) | Landlocked developing countries | Transit (coastal) neighbours |
|---|---|---|
Exporting | $3 204 | $1 268 |
Importing | $3 884 | $1 434 |
Sources: UN Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States (UN-OHRLLS), citing World Bank data (2014).
The table shows that a landlocked country paid about two and a half times as much as its coastal neighbours to export a container. High transport costs act like a tax on all exports and imports. They make labour-intensive manufacturing, which competes on small margins, almost impossible, and they raise the price of imported capital goods and fuel. By one UN estimate, the level of development in landlocked developing countries is about 20% lower than it would be if they had access to the sea.
Some landlocked countries have nonetheless become rich or grown fast. Switzerland, Austria and Luxembourg are landlocked and rich, because they sit inside large, open markets with excellent infrastructure, and Botswana has grown fast by exporting diamonds, which are light and valuable. Landlocked status matters most for poor countries surrounded by other poor countries with weak transport links and unstable politics.
Many of the world’s poorest countries lie in the tropics. A tropical climate can bring high temperatures that reduce working capacity, heavy rains and droughts that damage crops, poor soils and a heavy burden of disease.
Malaria is the leading example of an endemic disease. In 2024 there were an estimated 282 million cases and 610 000 deaths worldwide, and about 95% of both were in the WHO African Region, where about three-quarters of deaths were of children under five. Repeated illness reduces adults’ working days, keeps children out of school and harms their development, and the risk of disease discourages investment and tourism. Endemic diseases therefore lower both the quantity and the quality of labour, and they feed directly into the human capital loop of the poverty cycle.
Sources: World Health Organization, World Malaria Report 2025 and malaria fact sheet (2025).
Climate change adds to the burden. Low-lying, poor and agricultural economies, such as Bangladesh and the small island states of the Pacific, face more frequent floods, storms and droughts, and rising sea levels push salt water into farmland. Countries that contributed little to global emissions bear much of the cost, which makes climate vulnerability a question of equity as well as of growth.
Political and social barriers come from how a society is organised and governed: its laws, the honesty and competence of its state, and who has power and opportunity. Many economists now see them as the deepest barriers of all, because they decide whether the economic barriers can be tackled.
Institutions are the rules that shape economic life, both formal (laws, courts, regulators, the central bank, the tax system) and informal (trust, customs). When they work well, people can trade with strangers, invest for the long term and expect to keep what they earn. When they are weak, every transaction is risky.
Without the rule of law, contracts cannot be enforced, so firms deal only with people they know, and investors fear that a court or official will take their assets. Disputes take years to settle. Foreign firms stay away, and domestic savers move their money abroad. A legal system that protects people equally is therefore a precondition for investment and trade.
Governments of low-income countries usually raise far less tax, as a share of GDP, than those of rich countries. The tax base is narrow because so much activity is informal; collection is weak and exemptions are common; and tax systems often rely on taxes on trade and on spending that are easy to collect but regressive. With little revenue, the state cannot pay for the infrastructure, schools and clinics that would remove other barriers, and it becomes more reliant on borrowing and aid.
A weak banking system fails to turn saving into investment. Where few people have bank accounts, savings are kept as cash, livestock or jewellery and are not lent to firms. Banks that do exist may lend mainly to the government or to well-connected firms, demand large collateral, or be unstable. Small farms and businesses, the majority of firms, cannot borrow to invest. Mobile money and microfinance have narrowed this gap in some countries.
Secure property rights give people an incentive to invest, because they will keep the returns. They also allow assets to be used as collateral for loans. In many low-income countries land is held under customary or informal arrangements without a registered title, so a farmer cannot borrow against it and may not invest in irrigation or soil improvement for fear of losing the land. Unclear titles also lead to disputes and, in cities, to informal housing such as Kibera.
Good governance and corruption are closely linked: corruption is the most visible sign that governance has failed, because officials serve themselves rather than the public.
Corruption harms growth and development in many ways. Bribes act like a tax on business, but one that is unpredictable and goes to officials rather than to public services. Public money is stolen or wasted on projects chosen for the kickbacks they offer rather than their value, so roads are badly built and hospitals have no medicines. Contracts and licences go to the well-connected rather than the most efficient firms, which reduces efficiency. Corruption also undermines trust in the state, reduces tax compliance, discourages foreign investment and feeds capital flight.
The chart shows Transparency International’s Corruption Perceptions Index, which scores countries from 0 (highly corrupt) to 100 (very clean) based on surveys of experts and business people. Countries at the bottom, such as Somalia and South Sudan, are also among the poorest and most conflict-affected in the world. The index measures perceptions rather than corruption itself, and the link with income runs both ways: corruption keeps countries poor, and poverty makes officials more open to bribes.
Poor governance in its most extreme form is armed conflict. War destroys infrastructure, kills and displaces people, closes schools and diverts government spending to the military. It is one of the strongest barriers of all, and many of the countries with the lowest human development have suffered recent conflict.
YouTubeWhere girls receive less schooling than boys, women cannot own or inherit land, need a husband’s permission to work or open a bank account, or face discrimination at work, a large part of the population’s talent is wasted. This lowers the economy’s human capital and its productive capacity directly.
Female labour force participation varies enormously, even between countries at similar income levels. In 2025 about 69% of women aged 15 and over in Viet Nam and 63% in Kenya were in the labour force, compared with about 32% in India, 24% in Pakistan and 18% in Egypt. Low participation reflects social norms, safety concerns, unpaid care work and a lack of suitable jobs, and it means that a large share of potential labour is not used in paid work.
Gender inequality also holds back development through the next generation. Educated women tend to marry later and have fewer, healthier and better-educated children, and they spend a larger share of household income on children’s food and schooling. Closing gender gaps is therefore both a goal of development, part of equity, and a means to faster growth.
In many societies political power is held by a small group: a wealthy elite, one ethnic group, the military or a ruling party. Such groups can shape policy in their own interests: protecting their monopolies, keeping taxes on wealth low, spending public money in their home regions and blocking reforms that would threaten their position. Groups without political voice, such as rural populations, minorities, indigenous peoples or lower castes, may be denied land, schools, roads and jobs.
Economists Daron Acemoglu and James Robinson call institutions that concentrate power and wealth "extractive", in contrast to "inclusive" institutions that give broad groups secure rights and a share in decisions. Extractive institutions can produce growth for a time, for example from mining or plantations, but they rarely produce sustained development, because most people have little incentive or opportunity to invest and innovate. Unequal political power is therefore closely linked to economic inequality: each tends to reinforce the other.
Barriers rarely act alone. A landlocked, commodity-dependent country with weak institutions faces a combination in which each barrier makes the others worse. A fall in its export price cuts revenue, so the government borrows; debt service then squeezes health and education, so human capital stays low; and weak institutions mean that revenue in boom years is wasted rather than saved.
Shocks from outside expose these weaknesses. During the COVID-19 pandemic, about 70 million people were pushed into extreme poverty in 2020, the largest one-year increase since global poverty monitoring began in 1990. Countries with small tax bases, high debts and large informal sectors had little room to support incomes, so the setback to development was deepest where development was weakest.
Sources: World Bank, _Poverty and Shared Prosperity 2022, press release (5 October 2022)._
Interdependence also means that events far away can act as barriers. The closure of the Strait of Hormuz from late February 2026 sent the price of Brent crude oil from about $71 a barrel at the end of February to $118 by 18 March 2026, and it was still above $110 in early October 2026. Low-income countries that import all their fuel face higher costs for transport, farming and power, a wider current account deficit and pressure on their currencies, without any of the extra revenue that oil exporters receive.
Sources: U.S. Energy Information Administration, Brent spot price, via FRED DCOILBRENTEU (2026).
Each of these barriers holds back growth or development somewhere, but their importance differs greatly between countries and over time. Judging significance means asking which barriers bind most tightly in a given case, which can be changed by policy, and which would unlock progress on others if they were removed.
Scale of the effect. How much output or well-being is lost? Endemic malaria or a civil war affects the whole population; a single tariff on one export affects one sector.
How many other barriers it causes. Weak institutions and corruption make almost every other barrier worse, because they decide whether revenue is spent well, whether contracts are enforced and whether aid and investment are used productively.
Whether it can be changed. Geography cannot change, but its costs can be reduced by transport corridors and trade agreements. Institutions can change, but usually only slowly and with political struggle.
The time frame. Commodity price falls are severe in the short run but may reverse; low human capital takes a generation to fix but, once fixed, raises growth for decades.
Growth or development. Some barriers mainly limit output (infrastructure, debt); others mainly limit how far output improves lives (inequality, gender inequality, unequal power).
Economists disagree about which barriers are fundamental. One view, associated with Jeffrey Sachs, stresses geography: tropical disease, poor soils and distance from the sea keep some countries poor, so health programmes, agricultural research and aid for infrastructure come first. Another view, associated with Acemoglu and Robinson, stresses institutions: geography matters less than whether property rights are secure and power is shared, as shown by pairs of neighbours with the same climate but very different incomes, such as North and South Korea.
The evidence suggests that both matter and that they interact. Botswana, landlocked and once one of the poorest countries in Africa, grew fast with relatively strong institutions; neighbouring countries with similar geography and resources did far less well. Yet even good institutions struggle in countries with a heavy burden of disease or very high transport costs. A balanced judgement is that institutions are usually the most significant barrier in the long run, because they determine how the others are handled, while geography, disease and commodity dependence set the size of the challenge.
Barrier | Main effect | Most significant where… | Can policy reduce it? |
|---|---|---|---|
Weak institutions and corruption | Lower investment, wasted revenue, capital flight | States are fragile, power is concentrated, resource revenue is large | Yes, but slowly and against vested interests |
Low human capital | Low productivity, slow adoption of technology | Schooling is short, disease burden is heavy | Yes, with spending on health and education; results take years |
Commodity dependence | Volatile export earnings and revenue; few jobs | One or two commodities dominate exports | Partly, through diversification and saving boom revenue |
Indebtedness | Debt service crowds out public investment | Debt is in foreign currency and exports are volatile | Yes, through debt relief and careful borrowing |
Infrastructure gaps | High costs, limited markets | Power and roads are scarce, especially in rural areas | Yes, but needs large funds and good management |
Being landlocked | High trade costs | Neighbours are poor or unstable | Partly, through transport corridors and regional integration |
Inequality and gender inequality | Growth reaches few people; talent wasted | Inequality is high or rising; women excluded from work and property | Yes, through redistribution, education and legal reform |
The table is a starting point for evaluation, not a ranking that holds everywhere. For a landlocked copper exporter such as Zambia, commodity dependence and debt dominate; for a coastal country with fertile land but a history of conflict, governance may be the binding barrier; for a country such as India, with fast growth but low female labour force participation and large informal employment, the social barriers may matter more for development than for growth.
Key concept | How it applies to barriers to growth and development |
|---|---|
Scarcity | Capital, skilled labour, infrastructure and tax revenue are especially scarce, and barriers stop them from growing. |
Efficiency | Corruption, informality and poor infrastructure waste resources and keep productivity low. |
Equity | Inequality, gender inequality and unequal political power decide who benefits from growth. |
Interdependence | Commodity prices, foreign debt, capital flight and market access tie poor countries’ prospects to decisions made elsewhere. |
Sustainability | Debt, environmental damage and soil exhaustion can buy growth today at the cost of growth tomorrow. |
Change | Barriers are not fixed: institutions, technology (such as mobile phones) and world prices change, opening or closing paths to development. |
Zambia is a landlocked country in southern Africa with a population of about 20 million. It is one of the world’s larger copper producers, and its development shows how commodity dependence, indebtedness and geography can combine into a set of barriers that reinforce each other.
Ores and metals, mostly copper, made up between 71% and 79% of Zambia’s merchandise exports every year from 2020 to 2023, and 73% in 2024. Copper also provides a large share of government revenue and foreign currency. Zambia’s fortunes therefore follow the world copper price, which is set mainly by demand from China and other industrial economies and by supply decisions far beyond Zambia’s control.
The chart shows the volatility that the commodity-dependence diagram predicts. The copper price more than quintupled between 2002 and 2011, driven by China’s construction and manufacturing boom, and then fell by 45% between 2011 and 2016 as Chinese demand slowed and new mines opened. Because both the demand for and the supply of copper are price-inelastic in the short run, these shifts in demand moved the price far more than the quantity traded.
When copper prices fell after 2011, Zambia’s export earnings and tax revenue fell with them. At the same time the government was borrowing heavily, including by selling Eurobonds to international investors, to finance roads, power and other infrastructure. External debt rose from about a quarter of GNI in 2013 to 96% in 2017 and 167.5% in 2020, as the kwacha depreciated and the economy contracted during the pandemic.
Debt service rose to 32.8% of Zambia’s export and primary income earnings in 2019. In November 2020 Zambia missed a US$42.5 million Eurobond interest payment, becoming the first African country to default during the COVID-19 pandemic; real GDP fell by 2.8% that year. Zambia had followed the debt cycle step by step: falling export prices and a weaker currency raised the burden of foreign-currency debt, and servicing it left less for health, education and investment.
Zambia sought debt relief through the G20 Common Framework, a process for restructuring the debts of low-income countries owed to official creditors, including China. The IMF approved a US$1.3 billion Extended Credit Facility in August 2022. Agreement in principle with official creditors, covering about US$6.3 billion of debt, came in June 2023, with a memorandum of understanding in October 2023. A restructuring of about US$3 billion of Eurobonds followed in March 2024, in which bondholders gave up about US$840 million of their claims. The process took more than three years, during which Zambia had almost no access to new borrowing.
By 2025 restructuring agreements covered about 94% of Zambia’s external debt, and public debt was estimated to have fallen from 133.4% of GDP in 2023 to 93.4% in 2025. External debt was still 114% of GNI in 2024, and debt service rose again to about 30% of export earnings as payments resumed. Growth recovered to between 3.8% and 6.2% a year from 2021 to 2025.
Zambia’s other barriers made the shocks harder to absorb. Its exports must travel more than 2 000 km to the nearest port, so transport costs are high. About 70% of workers are in vulnerable, mostly informal employment, which narrows the tax base. Inequality is high, with a Gini coefficient of 51.5 in 2022, so the gains from mining booms reached relatively few households. Zambia relies heavily on hydropower for electricity, so low water levels at the Kariba Dam in 2022 forced power cuts for homes and businesses, showing how climate links to infrastructure.
Zambia shows commodity dependence, indebtedness and geography interacting. Borrowing during a commodity boom, in foreign currency, for projects whose returns came slowly, left the country exposed when the price fell. The case also shows the importance of institutions in a wider sense: the speed and fairness of international debt restructuring, which depends on creditors as much as on the debtor, determined how long Zambia stayed cut off.
The case has limits as evidence. Copper prices have risen strongly since 2020, which has helped the recovery as much as any policy, and a higher price will not remove the underlying dependence. Zambia also differs from many low-income countries: its CPI score of 37 in 2025 is close to the middle of the range, and it has had peaceful transfers of power, so governance has been less of a barrier than in more fragile states.
Sources: World Bank WDI TX.VAL.MMTL.ZS.UN, DT.DOD.DECT.GN.ZS, DT.TDS.DECT.EX.ZS, NY.GDP.MKTP.KD.ZG, SI.POV.GINI, SL.EMP.VULN.ZS (2026); IMF via FRED PCOPPUSDM (2026); IMF press releases 23/235 (June 2023) and 24/160 (May 2024); Reuters, via BusinessDay (25 March 2024); World Bank, Zambia overview (2026); Transparency International (2026).
Barriers to growth and development appear in Paper 1 Unit 4 questions, often as part (a) with a later part (b) on strategies, and in Paper 2 case studies of a developing country, where the text describes the barriers and a part asks for an explanation of two of them. The poverty cycle is the one diagram specific to this subtopic; AD/AS with LRAS and the commodity-volatility diagram are also useful.
Part (b) questions usually ask for a judgement, either about which barriers matter most or about a strategy to overcome them. The answer must weigh barriers against each other and use real examples developed in detail.
Paper 2 short items on barriers test definitions, calculations from data and short explanations.
Define [2]: capital flight; indebtedness; poverty trap; landlocked country. A full answer gives the category and the key feature (for indebtedness: owing large debts whose servicing takes a large share of income or export earnings).
Calculate [2]: using a table of copper prices and export volumes, the percentage change in export revenue; or debt service as a percentage of exports. Show the formula and the working, and give units.
Explain [4]: using a poverty cycle diagram, how low incomes in rural areas of the country in the text lead to low productivity. Two marks for an accurate diagram, two for an explanation tied to the text.
Explain [4]: two reasons why the country’s dependence on cocoa exports may be a barrier to economic growth. Each reason needs a mechanism (volatile prices because of low PED and PES; few links to the rest of the economy), not just a statement.
Evaluate [15]: using information from the text and your knowledge of economics, evaluate the extent to which the country’s high external debt is a barrier to its economic development. Use the text’s figures for debt and debt service, the opportunity cost in health and education spending, the role of the exchange rate, and whether the borrowing financed productive investment.
Barriers to growth limit productive capacity (LRAS); barriers to development stop growth from improving most people’s lives. Many barriers do both.
A poverty trap is a self-reinforcing cycle: low incomes → low saving and little spending on health and schooling → low physical and human capital → low productivity → low incomes.
Economic barriers include inequality, poor infrastructure and inappropriate technology, low human capital, primary-sector dependence, lack of market access, informality, capital flight, indebtedness, being landlocked and endemic disease.
Commodity dependence is a barrier because low PED and PES make prices volatile, and because commodity sectors create few links, little value added and a risk of Dutch disease.
External debt in foreign currency can create its own cycle, in which debt service crowds out public investment and depreciation raises the burden.
Political and social barriers (weak institutions, corruption, gender inequality and unequal power) shape whether the economic barriers can be tackled.
Significance depends on context; institutions are often the deepest barrier in the long run, while geography, disease and external shocks set the scale of the challenge.
I can explain what a poverty trap is and why poverty persists across generations.
I can draw a poverty cycle diagram with at least four correctly linked factors, adapted to a given context.
I can explain each economic barrier to growth and development with its mechanism.
I can use a diagram to explain why primary commodity prices are volatile.
I can explain how weak institutions, corruption, gender inequality and unequal political power hold back development.
I can calculate changes in export revenue and the burden of debt service from data.
I can explain how barriers interact, using Zambia or another real example.
I can evaluate which barriers are most significant for a particular country and reach a justified judgement.
The work does not reach a standard described by the descriptors below. |
1 | 1–2 | Little understanding of the specific demands of the question. Relevant economic theory is stated but not relevant. Economic terms are stated but not relevant. |
2 | 3–4 | Some understanding of the specific demands of the question. Relevant economic theory is described. Some relevant economic terms are included. |
3 | 5–6 | The specific demands of the question are understood but only partially addressed. Relevant economic theory is partly explained. Some relevant terms are used appropriately. Where appropriate, relevant diagram(s) are included. |
4 | 7–8 | The specific demands of the question are understood and addressed. Relevant economic theory is explained. Relevant terms are used mostly appropriately. Where appropriate, relevant diagram(s) are included and explained. |
5 | 9–10 | The specific demands of the question are understood and addressed. Relevant economic theory is fully explained. Relevant terms are used appropriately throughout. Where appropriate, relevant diagram(s) are included and fully explained. |
Using real-world examples, discuss the effectiveness of foreign aid in promoting economic growth and development.
15 marks
Answers may include:
Terminology: foreign aid, humanitarian aid, development aid, official development assistance (ODA), tied aid, non-governmental organizations (NGOs), economic growth, economic development.
Explanation: aid fills the savings and foreign exchange gaps, finances infrastructure, health and education, and provides emergency relief that prevents loss of life and human capital after disasters; it can shift the PPC outward over time and raise living standards.
Diagram(s): PPC shifting outward; AD/AS diagram with LRAS shifting right; poverty cycle showing where aid breaks the cycle.
Synthesis/evaluation: effectiveness depends on governance, corruption and absorptive capacity; tied aid may favour donor firms; dependency and reduced incentives for domestic tax collection; aid may be poorly coordinated between donors; humanitarian aid saves lives but does not necessarily raise long-run growth; alternatives such as FDI, trade, debt relief and remittances; short run versus long run; a reasoned conclusion.
Examples: the slow and poorly coordinated reconstruction in Haiti after the 2010 earthquake despite large aid pledges; the post-war Marshall Plan (1948–1952) supporting European recovery; Rwanda's use of aid alongside institutional reform; GAVI-funded vaccination programmes improving health outcomes.
N.B. Terminology, theory, diagrams and examples given in part (a) and referred to in part (b) should be rewarded.
Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded.
Markbands (best fit)
Level | Marks | Descriptor |
|---|---|---|
0 | 0 | The work does not reach a standard described by the descriptors below. |
1 | 1–3 | Little understanding of the specific demands of the question. Theory is stated but not relevant. Terms are not relevant. No synthesis or evaluation. Real-world examples are identified but not relevant. |
2 | 4–6 | Some understanding of the demands. Relevant theory is described. Some relevant terms are included. Synthesis or evaluation is superficial. A relevant real-world example is identified. |
3 | 7–9 | The demands are understood but only partially addressed. Theory is partly explained. Some terms are used appropriately. Relevant diagram(s) are included where appropriate. Synthesis or evaluation is appropriate but lacks balance. Example(s) are identified and partly developed in context. |
4 | 10–12 | The demands are understood and addressed. Theory is explained. Terms are used mostly appropriately. Diagram(s) are included and explained. Synthesis or evaluation is appropriate and mostly balanced. Example(s) are identified and developed in the context of the question. |
5 | 13–15 | The demands are understood and addressed. Theory is fully explained. Terms are used appropriately throughout. Diagram(s) are included and fully explained. Synthesis or evaluation is effective and balanced. Example(s) are identified and fully developed to support the argument. |
Read the extract and answer the questions that follow.
Text A — Doctors leave Quessland
[1] Quessland is a low-income economy in West Africa. Its government spends a large share of its education budget training doctors and nurses, who represent an important part of the country's human capital.
[2] In recent years many newly qualified doctors have emigrated to high-income countries, where salaries can be ten times higher. The number of doctors working in Quessland fell from 9 400 in 2020 to 7 990 in 2025, while the population continued to grow.
[3] Some doctors working abroad send money home to their families, and a few have returned with new specialist skills. Remittances from all Quessland citizens abroad now exceed the country's receipts of foreign aid.
Define the term human capital indicated in bold in the text (Text A, paragraph 1).
2 marks
Using information from Text A, paragraph 2, calculate the percentage change in the number of doctors working in Quessland between 2020 and 2025.
2 marks
Using a production possibilities curve (PPC) diagram, explain how the emigration of doctors could affect Quessland's production possibilities (Text A, paragraphs 1 and 2).
4 marks
Explain two ways in which the emigration of doctors might benefit Quessland's economy (Text A, paragraph 3).
4 marks
In 2025 severe floods in Country G destroyed 12 % of its farmland, washed away bridges and roads and damaged thousands of homes. Many factories that were not damaged were unable to operate for several weeks because workers and supplies could not reach them.
Using a production possibilities curve (PPC) diagram, explain the effect of the floods on Country G's production possibilities and on its actual output.
4 marks