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Strategies 4

Market based supply-side policies

They can be used as a development strategy when the government allows the market to facilitate economic development in an ELDC.

  • Encouraging export promotion strategy through liberalized free trade
  • Decreasing direct taxation on individuals and business to increases motivations
  • Privatization of key domestic industries to improve productive efficiency
  • Deregulation of markets to encourage competition


  • Creating greater efficiency
  • Free trade – lower price – welfare gains for consumer
  • Lower rate of tax – increases consumption and investment
  • Deregulation & low business tax – attract foreign investment


  • Deregulation – market failure
  • Cut taxes – widening income inequalities
  • Free trade – increase foreign competition – business failure

Interventionist policies

Where government is actively involved in the economy through its own expenditure and activities to facilitate economic development in ELDC.

  • Investment in infrastructures
  • Improving human capital
  • Mange the distribution of income
  • State provision of merit and public good


  • Increase potential output
  • Achieving socially efficient output


  • Excessive bureaucracy corruption and inefficient management
  • Opportunity cost
  • Interest repayment + raising taxes