Factors of Production, Economic Growth, and Sustainable Development
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Factors of Production (FP) are all the inputs or resources that are used by individuals for production purposes (goods and services) including land, labor, and capital (Case et al. 2009) and entrepreneurship, which is considered as the fourth factor of production (Schiller 2009).
Land incorporates any type of natural resource that is used for producing goods and services. Moreover, it comprises anything that the land contains, such as water and forests (renewable resources) or oil, gas, metals, and coal (non-renewable resources). The return from land is usually rent (Schiller 2000).
Labor does not refer only to manpower count but to the work that individuals carry on to produce goods and services, whether they are skilled or not. The return from work is either salary or wage (Schiller 2000).
Capital are goods and services that are used for the making of further goods and services comprising equipment, machinery, books, etc. Money cannot be considered as capital; since it does not yield products, it allows for the purchase of resources for production use. The return from capital resources is interest (Case et al. 2009).
Entrepreneurship is the method of using the available resources (land, labor, and capital) to produce new or improved products. The return from entrepreneurship is profit (Case et al. 2009).
Economic Growth (EG) is the expansion in the production of an economy in terms of goods and services made in a set time period. It transpires when a country attains fresh resources or when a country makes more output by means of available resources. EG is calculated by getting the percentage change in real GDP per capita from 1 year to the other; thus, EG is quantitative in nature (Schiller 2009).
Economic Development (ED) is defined as the quantifiable and non-quantifiable variations in the economy. It is the uninterrupted and cooperative actions done by legislators and societies that sanction definite lifestyle standards and the economy of a certain territory (Todaro and Smith 2009).
This chapter includes five sections incorporating a Definition section followed by an Introduction that presents the relationship between FP, EG, ED, and SD. Section 3 features four subsections discussing the different FP and their relationship with EG. The fourth section discusses the nexus between EG, ED, and SD; and finally, a conclusion section summarizes the findings and discussion undertaken.
The relationships between EG, ED, and SD have been under study for quite some time. Yet to attain ED and SD, EG must be realized first, because of the composite relationship existing among them (Sen 1983). Hence, to achieve EG, there are a number of factors that are needed to be available and efficiently used. These factors are known as the FP and are mainly divided into four categories (land, labor, capital, and entrepreneurship) that are considered as inputs to produce goods and services (Case et al. 2009).
The key goal of EG is to intensify the economic worth of goods and services produced in a certain country in a specific time period using the available FP. EG is calculated in terms of short-run EG and long-run EG (Schiller 2009). The short-run EG materializes once the aggregate yield of goods and services available increases and the economy escalates while using the available resources more efficiently, i.e., FP. This type of EG can be quantified by measuring differences in real GDP from 1 year to the other. Hence, to achieve EG, more inputs need to be used in terms of land, labor, and capital; nevertheless, these inputs are scarce and they require to be well adjusted. Sometimes additional inputs do not fundamentally yield more output (Pogosov 2015; Schiller 2009).
On the other hand, long-run EG takes place once there exists a continuous rise in real GDP over time. It is in this case innovation such as technology; scientific development, new products, and economic configuration of production play a significant role. The reason behind that lies in the fact that the introduction of science and technology leads to an upsurge in labor productivity, i.e., a rise in the output of work delivered with the same amount of time spent, hence higher use of on hand FP (Schiller 2009).
Once long-term EG occurs, the ability of the economy to produce escalates, where the economy has the capability to produce over and above what it usually produces. Furthermore, it is well acknowledged that when the output of goods and services increases at a greater rate than the inhabitants’ number of a country, the standard of living in that country increases (Pogosov 2015; Schiller 2009).
Yet to induce innovation, the entrepreneur and the working force must be motivated, and it is here where ED comes into the picture. This motivation can be simply attained through the introduction of incentives that remunerate their productivity. The major incentives that will act in such a manner are policies, laws, regulations, customs, food safety and security, health, infrastructure, and social legislations. The importance of these incentives is that they outline human interaction, behavior, social stability, and satisfaction, in other words, the attainment of ED (Todaro and Smith 2009) (Fig. 1).
In addition, the environmental/natural resources are limited, yet the requirement for more production is needed. Hence, the full growth cycle will not be complete until these environmental/natural resource concerns are introduced with the ED requirements discussed in the previous paragraph (Fig. 1). Furthermore, based on the fact that EG is not only a short-run process but a long one as well, the availability of the resources on hand must be wisely used, i.e., FP. This is done in order to make sure so that these resources will be available for use by future generations to maintain and sustain EG. This process of economic, social, and environmental combination is what is known as SD (Meier and Rauch 2005).
Factors of Production and Economic Growth
Based on what has been mentioned in the introduction, the attainment of ED and SD is dependent on how much FP is used optimally to attain EG. Thus, the effect of FP on EG can be of two types: the direct and the indirect ones. The direct factors include labor, capital, land, and entrepreneurship (Pogosov 2015). Indirect factors on the other hand consist of the state of monetary and fiscal structures, monopolization, world market competitiveness, business environment, corruption, and others (Pogosov 2015). In this section, the direct factors will be discussed.
Land and Economic Growth
Land as an FP is the primary location where all economic endeavors take place and investment in land leads to an increase in native wealth (He et al. 2014). The most important natural resources are land, minerals, forests, and water resources (Pogosov 2015). However, the neoclassical growth model states that land provision in EG has a minimal role and can lead to a negative effect if continuous input of technology and other FP takes place (Van der Veen and Otter 2001).
Using China as a case study example, this is not the case. For the last four decades, China’s economy has rapidly grown and has become the second global economy. It is also the biggest global factory, as well as the primary world exporter (Liu et al. 2016). In China growth and structural changes (SC) have acted as a motivator for EG (Wu and Zhang 2012). Hence, land can be thought of as an essential factor that led to the speedy growth of China’s economy (Ding and Lichtenberg 2011).
Based on Canfei et al. (2014) research, Chinese authorities divided the land into three different classes. These are lands used for agricultural, second construction, and third fallow land. The first class of land is used for farming purposes. Building and structures are erected in the second class; and the lands that do not belong to either class are considered in the third class. In China a significant territory of land has been converted from agricultural land to other land usage specifically in coastal and central provinces (industrial areas and for transportation) (Canfei et al. 2014). Furthermore, in China EG relationship with land varies significantly among regions due to lack of land resources and ED level. It is witnessed that land contribution in China’s coastal region has notably encouraged EG, as compared to central and western China where EG relies on capital and labor (Ding and Lichtenberg 2011). Nonetheless, these conclusions are controversial; land input and EG have significant relationship in western China, while others claimed that from 2003 to 2012, the land contribution effect on EG has been the greatest in central China and smallest in eastern China (Tan et al. 2012).
Land plays a vital role in attaining EG and measuring economic performance by local governments (Wu et al. 2015). Thus, local governments compete among each other in attracting new investors and establishing new development zones (Zhou et al. 2017). These created zones can avail more land areas next to cities that have new infrastructure and construction that attract new investors. However, these zones because of the competition among local governments have led to a negative EG effect, as compared to areas where transportation projects have been implemented, where a positive EG has been realized (He et al. 2014).
This relationship between EG and land has taken place, because local governments are pushing for the transfer of land usage from agricultural to the secondary and tertiary sectors. The process by which local governments triggers EG takes place through transferring land to investors and gathering land transferring payments (Tao et al. 2010). Over and above, regional governments may request lower land custodies to attract foreign investments such as Foreign Direct Investment (FDI), which stimulate local EG (Liu et al. 2008). Correlation analysis results showed that there exists a sturdy relationship between the change in land use and GDP growth. Moreover, results have suggested that EG and competition on land availability have led to change in land use. Yet the change in land use has not resulted from EG alone but also a result of the different factors leading to that growth. In addition, land has been always considered as an attraction to FDI, thus triggering EG by pumping investments inside a country (Canfei et al. 2014).
However, this method of transformation toward industry and urbanization has caused social pressure, environmental degradation, and economic fluctuation, i.e., negative ED and SD effect (Lin 2009). This speedy change to urban land has created a huge pressure on the natural landscape and agricultural lands, transferring approximately one third of these lands to constructional land during the period extending from 1997 to 2005 (Xu et al. 2015). EG in China has led to the fast development in metropolitan construction land on the expense of arable land that has suffered a high depletion rate. In China from the year 2000 to 2016, the urban construction land has ascended by 138.59% (National Bureau of Statistics of China 2017). Moreover, in 2011, 50% of China occupants have been residing and working in its cities (National Bureau of Statistics of China 2012).
Land excessive use has led to several concerns including land resource depletion and erosion, decrease in landscape areas, and increase in carbon emissions due to ecosystem destruction, i.e., negative SD (Liu et al. 2018). In addition, China’s population increases, and its fast descent in cultivated land area has elevated fears about the capability of the Chinese people to feed themselves and the probable effect of this condition on worldwide food security issues, i.e., negative ED (Lin and Ho 2003). Based on Jin et al. (2018) research, there is a need to boost the execution of a two-way beneficial strategy for both arable land protection and EG. The best way by which such a plan is to be implemented is through coordinating among EG, technological advancement, and efficiency improvement. Accordingly, the Chinese authorities and local governments need to avail sound policies that will be able to protect and sustain arable land, as well as to maintain EG, i.e., enhance SD. This is required in order to face the loss of agricultural land areas and growing food requirement due to inhabitant increase (Jin et al. 2018).
Labor and Economic Growth
Wages/salaries per labors/employees vary among nations. It is documented that wealthy nations are 30 to 40 times better off than poor nations in terms of labor/employee wages/salaries. Furthermore, it is acknowledged that these variations among wealthy nations are predominantly due to alterations in FP (Parente and Prescott 2000).
To determine these variations in FP, investigators have used to evaluate nations’ differences in FP based on labor quality. Labor quality is usually determined using data on schooling, as well as using the Mincer earnings function (MEF). However, such labor quality evaluations may represent a small portion of the variation in FP (Caselli 2005). Scholars state that there might be variations in FP that can incorporate unmeasured labor quality alterations. Nowadays, there are two methodologies that are used to compute these unmeasured alterations. The first method has been used by Hendricks and Schoellman; they have computed the variances among different nations labor quality by using labor wages of immigrants from various nations working in the US workforce market (Hendricks 2002; Schoellman 2011). The second method has been used by Erosa et al. (2010); researchers have developed theories of labor force traits centered around undetected singular assorted trait mixture, where the main factors describing the assorted traits and mixture have been corrected with data of US labor wages (Erosa et al. 2010).
Cubas et al. (2016) conducted a research where a model is developed to measure differences between skilled and unskilled labors, as well as investments in skilled labor. The research conclusions have been coherent with those of Erosa et al. (2010). They have reported that worker quality discrepancies between the rich countries and the poor ones are about twice in value to those in the MEF of labor quality (Cubas et al. 2016). Hence, based on the above, it can be concluded that labor wage quality differences among different nations and the relative importance of FP play a major role in EG (Schiller 2009) and eventually on ED due to the quantifiable and non-quantifiable variations in the economy (Todaro and Smith 2009).
Taking Colombia as another case study, Farné and Vergara (2015) studied the Colombian labor market from 2002 to 2011. It has been found that there is an increasing rate in the non-typical forms of employment, such as labor cooperatives and subcontracting and self-owned work. However, non-typical employment mitigates the cost and responsibility of social security from governments and companies to labors. Furthermore, this type of employment renders union representation difficult and usually leads to lower job security and remunerations, i.e., negatively affects ED (Kalleberg et al. 2000). As per the researchers, the main reason behind such an employment trend is due to the escalation in short-term employment between 1990 and 2000 and the drop-in trade that has occurred between 1985 and 1988. Nevertheless, when the economic crisis ended in the late 1990s, the Colombian economy recuperated, where EG increased at a rate of 4.5% annually. Furthermore, this recuperation has generated new jobs reaching to more than four million; this ultimately led to the increase in employment from 51 to over 56% (Farné and Vergara 2015).
Another concern that has been dwelled on is the employment in terms of quantity and quality (ED) and their association with EG. Employment quality and quantity is usually a matter of concern to any business owner. Nonetheless, it is rational to presume that whenever there is EG, any increase in the quantity of employment will be complemented by an increase in quality and vice versa (Davoine 2006). Yet according to Davoine, the theoretical and empirical relations between employment and unemployment as well as the employment quality are not entirely well-defined (Davoine 2006), which remain affected by the labor marketplace foundations of every nation (Weller and Roethlisberger 2011).
Farné and Vergara (2015) state that there is a slight but wide enhancement in employment quality in Colombia; and it has not been affected by the quantity or type of employment or gender issues. Additionally, the research proposes that there exists either a neutral or positive relationship between employment quantity and quality, since both have enhanced simultaneously (Farné and Vergara 2015). Similar results have been documented by Gamero in Peru and in Bolivia and in Ecuador by Marull, where both authors have studied how EG has been complemented by better employment attributes, apart from the variation of the employment connection in terms of quantity and quality (Marull 2010; Gamero Requena 2011). Weller and Roethlisberger, on the other hand, carried on a research on 18 Latin American nations. Research results have indicated that employment quality increased, when higher economic and productive values have been achieved. This increase in quality has been due to the increase in remunerations, which according to the economic theory will yield higher benefits in other variables. These variables include employment contracts, social security, insurance, and other factors that represent what is called beneficiary package, i.e., affecting ED positively (Weller and Roethlisberger 2011).
Davoine et al. (2008) carried on a similar research on 15 countries in Europe, all of which belong to the European Union. Results obtained are similar to those in Latin America. Values attained show high affiliation between employment quality and employment tariffs in all 15 countries (Davoine et al. 2008).
The main difference between Colombia and the European countries is that in Europe people applied to good-quality jobs, while in Colombia it is the non-typical employment which has benefited from enhanced employment quality. In other words, employment quality is about availing improved working environment in places that are usually recognized to be of inferior one. However, there is still much to be done in Colombia to improve employment quality conditions. This can be done through better utilization of the different FP so as to attain higher EG and ED. In conclusion, both researches in Europe and Latin America tend to advocate the following; EG that results from an upsurge in remuneration leads to an improved employment conditions in terms of quantity and quality, i.e., higher EG and ED (Farné and Vergara 2015).
Capital and Economic Growth
EG is one of the major concerns to governments, economists, and the business sector. The term capital as mentioned earlier represents the total quantity of buildings, structures, equipment, etc. used for producing new goods and services (Case et al. 2009). However, there exist other types of capital that are intangible that are hard to measure but may increase productivity; examples of such intangible capital may involve enterprise name, expertise, client loyalty, etc. (Syverson 2011). Nevertheless, there are several ways by which capital is used to realize EG.
First, EG to occur it depends on two aspects, fixed capital use and the increase in production level (Pogosov 2015). To attain an increase in production level, fixed capital usage must operate under certain conditions. These conditions entail using typical industrial level, moderate technological process, increase in capital, and growth of employment. These conditions if met, fixed capital usage leads to growth in capital intensity of labor and enhancement of performance. This growth can be measured via the improved usage of capital (plant and equipment) in novel areas of production. Ultimately such a trend will lead to EG (Pogosov 2015).
Second, capital can be used to achieve EG by endowing in research and development (R&D). Science advancement and the usage of its successes in production permit the introduction of novel products and services and new technology and equipment. These attainments lead to an escalation in output levels, lower production costs, higher labor productivity, higher wages, better standard of living, and eventually EG and ED. Nevertheless, it is to be noted that changes in capital usage are linked not only with the type of investments (production or R&D) but also with SC in nations’ economies. Hence, it is due to SC in the economy that variations in the degree of growth of production in industries occur (Pogosov 2015).
Third, the financial market is one of the main tools by which capital is used to achieve EG. Nations to attain EG rely on financial market proficiency that allows the competent distribution of business resources and innovations. This distribution improves economic output and achieves markets’ requirements (Schumpeter 1911). The financial sector development aids in realizing EG through the increasing use of innovative undertakings (King and Levine 1993). Levine uses the endogenous growth theory to demonstrate that financial organizations act as a major player in availing key information to corporations for investment decisions, which contribute to EG (Levine 1997).
Nevertheless, certain empirical studies state that EG can inhibit financial development or innovation (Hsu et al. 2014). Based on that, Pradhan et al. conducted a research on the subject, and results indicate that financial development and innovation have an effect on the attainment of long-run EG. Furthermore, results show that to encourage EG in the Eurozone states, governments need to give precedence to financial sector modifications and development (Pradhan et al. 2016).
Fourth, using foreign capital (FC) as a measure to attain EG, Edwin (1950) in his research states that the distribution of significant amounts of FC in developing countries leads to the increase in EG (Edwin 1950). FC as a factor that affects EG is well established; however, its effect based on theoretical and empirical studies is controversial (Waheed 2004). Currently with financial globalization, there exists an enormous transfer of FC to the industrial and developing economies.
FC is needed in a developing economy to achieve ED; based on the study carried by Mohey-ud-din (2007), results show that GDP in Pakistan is affected by FC. The effect can be witnessed through the support that the FC provides. The support is given to the primary (agricultural) and secondary (industrial) sectors in terms of technical assistance, policy assistance against budget shortfalls, and the deficits in the evenness of payment (Mohey-ud-din 2007). Moreover, when external capital enhances a developing economy’s scarce national resources, it speeds up EG (Morrissey 2016).
FC is of two types, foreign aid (FA) that is related to the welfare purpose and FDI which is channeled by the profit intention (Sahoo and Sethi 2013). FC, specifically FDI, has shown positive results on the economy of South Korea; 20% of the growth achieved in the industrial sector has been due to FDI in that period (Hong 1997). FDI speeds up the growth practice by acting as a complementary economic factor (Trevino and Updhyaya 2003), as well as a growth influential factor (Clark et al. 2011) within the economy. However, Bhandari et al. (2007) have studied the effect of foreign capital (FA and FDI) on several East European countries. Results have shown that FDI has substantial non-negative effect on EG, while FA has shown a trivial effect (Bhandari et al. 2007).
Conversely, some developing countries have suffered substantial negative effect on EG when engaged in FC investment. Griffin claims that external or FC reduces savings and has shown a non-positive effect on EG (Griffin 1970). In addition, other researchers have found that FA has a non-positive effect on EG of the beneficiary nations (Knack 2000; Gong and Heng-fu 2001).
To determine what effect FC (FA or FDI) has on EG, Sahoo and Sethi (2015) have took India as an example and studied the FA and FDI effect. Results that have been recorded indicate that foreign flow in both forms has been ineffective. Yet it need not be stopped because no single country is self-sufficient and what applies to India might not apply to other countries. Nonetheless, to alleviate such a situation, it has been suggested that the government needs to put proper planning and use FC in different development programs, whose effect will be visualized in the long run. Examples of these development programs include employment, infrastructure, education, and health, i.e., ED (Sahoo and Sethi 2015).
Entrepreneurship and Economic Growth
Entrepreneur is a term referred to an innovative individual who engages in several practices including discovering, evaluating, exploiting, and responding to pioneering ideas and new opportunities. Entrepreneurship is a combination of two singularities: first the entrepreneurs’ work and second the existence of profitable prospects (Venkataraman 1997). Entrepreneurship prospects encompass conditions where new merchandises, amenities, raw resources, and new enterprise approaches are presented and traded for a selling value which is greater than the price of making (Casson 1982).
There are two types of entrepreneurs, the necessity-based entrepreneurs and the opportunity-based entrepreneurs. Necessity-based entrepreneurship arises when entrepreneurs in a country sense that there are no other available job prospects; thus, they begin a business rather than becoming unemployed. Opportunity-based entrepreneurship, on the other hand, materializes when entrepreneurs recognize a new trade prospect that entrepreneurs feel will be profitable (Lecuna et al. 2017). However, Shane (2009) debates that the establishment of new companies in an economy does not necessarily mean new job opportunities, rejuvenate recession economies, or seed other forms of economic growth (Shane 2009); but it is when economies grow that entrepreneurs can offer the absent connection to realize the economic opportunities and job creation possibilities of evolving economies (Amorós et al. 2012). Nevertheless, there are certain factors that affect entrepreneurship, the most important of which include the following.
First, scholars have debated that the fast advancement of science and technology has resulted in the reduction on the reliance on natural resource inputs to promote EG (Skonhoft and Solem 2001; Romer 1986). Scientific and technological progress represents the improvements and innovations that lead to novel products; in addition, it leads to the advancement of management and entrepreneurship practices. Thus, scientific and technological progress acts as a subsidiary of entrepreneurship and leads to an escalation in employment rate and an upsurge in labor productivity, hence EG and ED (Pogosov 2015). The endogenous growth theory has encouraged research on the ways by which innovation can affect EG (Cameron 1998). Using the endogenous growth theory, Romer (1990) demonstrates that the fundamental sources of EG are technology, human capital development, and R&D (Romer 1990).
Second, a nation’s culture plays a considerable role in its entrepreneurial capability. Colino et al. (2014) state that the local research done in nations adjacent to highly technological nations (United States) has encouraging prospects for those nations. In contrast, less developed nations that are far from those highly technological nations achieve higher benefit from purchasing goods that include technical development and from FDI (Colino et al. 2014). Moreover, empirical literature advocates that technological dispersion plays a substantial role in nations with small productivity levels (Nonaka 1991). Hence, a nation’s culture and entrepreneurs (FP) perform a significant part in EG, ED, and SD, because entrepreneurs discover opportunities and create them (Shane and Venkataraman 2000).
Third, social sciences researchers including economists and finance, management, and entrepreneurship scholars are becoming increasingly interested in the subject of poverty reduction (Sutter et al. 2019; Chen et al. 2017; Dollar et al. 2016). Si et al. (2020) state that the rapid increase in EG in the last few decades has reduced the poverty line to lower than ten percent of world population. Nevertheless, the poverty level has not been reduced equally across the world; it has varied across the globe. According to Si et al., social scientists view entrepreneurship and business development as a major factor that if used can alleviate poverty worldwide. Nonetheless, there exist certain aspects that need to be clarified. These include finding a link among the different FP within and across nations and availing new methods and solutions to efficiently decrease poverty within the existing political and economic milieu (Si et al. 2020).
Finally, because of the conviction and argument that promoting entrepreneurial spirit within a society is a serious aspect in gaining work opportunities in all countries whether developed or developing (Birch 1979), researchers and legislators have attempted to determine the different relationships that will intensify the entrepreneurs’ output in developing countries (Baumol 1990). Oosterbeek et al. (2010) have led a research to identify the features that affect and entice entrepreneurs to launch and improve their enterprises. Results attained have shown that improving higher education in developing countries may be more essential than availing more resources to entrepreneurs’ educational programs (Oosterbeek et al. 2010).
Economic Growth, Economic Development, and Sustainable Development
Based on the previous discussion in section “Factors of Production and Economic Growth,” where the relationship and the effect of FP and EG have been reviewed and their subsequent consequence on ED and SD is witnessed, EG can be considered as a prerequisite to ED and SD. Hence, it is important to dwell on the relationship between EG, ED, and SD.
ED involves the socioeconomic changes that occur in a country. It signifies EG and social welfare changes in the economy (Todaro and Smith 2009). The essential factor that affects ED is human resources, because these resources are the key elements that determine the efficient use of FP (Pogosov 2015), thus attaining EG and social welfare. Koplyay et al. (2014) proclaim that the best investment a nation can chart to achieve wealth and growth is when investing in its citizens to acquire information and knowledge (Koplyay et al. 2014).
Studies on human capital show that nations that assign greater investment in terms of health services, research possibilities, and education record the utmost economic achievement, i.e., ED; examples include South Korea and Singapore (Lazar 2005). Hence, education and health can be thought of as consumer goods and a straightforward investment in business, which avail several remunerations to a nation’s residents (Ștefănescu-Mihăilă 2015).
The idea of evaluating nations’ economic power on GDP only does not apply anymore. Social scientists are relying more on GDP coupled with the development capability of human resources (Roos and Roos 1997), i.e., ED, since human resources is the essential factor affecting it.
Popescu (2014) claims that in a country, the futuristic development of the education field can be measured based on the percentage of GDP that has been spent on education and health in that country (Popescu 2014). Furthermore, Ștefănescu-Mihăilă (2015) states that when a person innovative faculty is improved by his skilled proficiency, abilities, and health, it upsurges his power to generate economic-social goods and services, which leads to future income production (Ștefănescu-Mihăilă 2015). This action, when it spreads across a country, leads to increasing output and social outcome, thus resulting in EG increase and an attainment of ED.
Moreover, Ștefănescu-Mihăilă (2015) stresses on the role of education and health in achieving ED. Upon achieving high levels of productivity, the educational level of labor increases. This escalates the value of labor and results in higher labor wages. Additionally, increasing labor training will intensify labor capabilities and permit for better tuning of the labor market settings. Consequently, education is viewed as a method of accruing human capital.
Human capital involves the educational capital and the biological one. The educational capital designates a person’s capabilities that are assimilated from learning within or outside educational institutions. The biological capital on the other hand includes health with respect to person physical capacities. Researches have recognized an interdependent relationship between education and capital. Having a good health condition is like having good economic resources, which is an essential factor for the attainment of good educational capital. Similarly, having a good educational level leads into a higher interest in maintaining good health. This education-health relationship ultimately results in either increasing or decreasing workforce capability and thus increasing or decreasing human capital (Ștefănescu-Mihăilă 2015), i.e., increasing or decreasing ED eventually.
According to Sen (1983), ED and SD cannot be considered as synonymous. ED encompasses the practice of expanding resource utilization and intensifying richness, even if all of these resources become exhausted in the future, whereas SD involves ways of escalating richness while conserving the environment, so that natural resources may still be available for use by future generations (Sen 1983). It goes without saying that when ED is mentioned, EG is as well, since EG is a part of ED (Fig. 1).
The interactions that are occurring between the economic community and ecological systems have been acknowledged in the rising impact on the national and international scopes in terms of environmental policies and SD strategies (Briassoulis 2011). Although these interactions are influencing all countries, nevertheless, the environmental deterioration that is taking place varies among them. This variation occurs because of the diverse societal and economic actions (ED) and the actual environmental abuse of natural resources among countries (Galeotti 2007). The inquiry on whether a sustained EG is enough to lower the load exerted by man on the environment is the essential question that environmentalists and economists debate upon (Dasgupta et al. 2002). The societal and economic (ED) discrepancies among nations have been an increasing disparity in SD disputes (Zuindeau 2007); over and above, it has been found that the environmental land degradation is affected by land area distribution (Kahuthu 2006).
Environmental quality has numerous dimensions that are different in nature, yet connected to each other intricately. However, each one of these dimensions has diverse relations with economics (Basso et al. 2000). The value by which pressure can be reduced on the environment can be achieved using a mixture of policies and economic PF. This mixture needs to be directed toward decreasing socioeconomic (ED) discrepancies among territories. Based on that, Ranjan and Shortle (2007) have found out that this process applies in several related areas such as population type and social aspects and lifestyles (Ranjan and Shortle 2007).
The environmental Kuznets curve (EKC) stipulates that when income rises, environmental awareness and preservation increases. This stipulation has promoted attention among scientists and politicians (Caviglia-Harris et al. 2008). EKC premise states that when EG results in quicker wealth formation, technological progress arises which in turn leads to a better environment (Bimonte 2002). The higher the income levels, the more the consumers will prefer purchasing ecofriendly commodities rather than non-ecofriendly ones; furthermore, elevated income rates lead to an improvement in environmental protection policies (Vona and Patriarca 2011), thus attaining SD.
Land degradation is a process that is brought about by natural (global warming and landscape transformations) and human intervention (population growth) in many countries (Sommer et al. 2011). Land degradation lead to a serious decline in land yield accompanied with significant socioeconomic effects (Romm 2011).
Salvati et al. (2011) have conducted a case study on Italy over a 50-year interval. Results indicate that EG, ED, and SD have fluctuated over time in the different Italian regions. According to the authors, that period has been characterized by the influence of two factors, which are income and environmental degradation. Italy economy has been changing toward the service sector, while at the same time, the primary or agricultural sector has been losing its position in favor of the manufacturing one. This has led to the decrease of employment in the primary sector and to the rise of internal migration, resulting in either leaving agricultural lands unattended or transforming them to industrial ones (Salvati et al. 2011). This ultimately could have significant effects on the environment (Salvati and Zitti 2009). Hence, in attempting to attain EG and ED, care needs to be taken not to devastate the environment.
Esposito et al. (2016) carried on a study on economic variables and land degradation. Results indicate that poor regions not only suffer from low GDP but also have high land degradation. Nevertheless, the study shows that land degradation is increasing as well in high GDP areas. It has been found that land degradation has been affected by several elements including population concentration, agricultural activities, and capabilities of the service sector, i.e., ED (Esposito et al. 2016; Auffhammer and Carson 2008). Hence, developmental policies need to include methods to lower the effect of fast changes in the economy, specifically, in rural areas where GDP and social welfare are low (Tan 2006). This can lead to decreasing environmental discrepancies and socioeconomic variations (Esposito et al. 2016).
To attain EG, ED, and SD, FP are needed to be available in adequate amounts and are efficiently used. As discussed previously, FP are divided into four categories. These categories are land, labor, capital, and entrepreneurship. Furthermore, these FP have different effects on EG, ED, and SD; hence, it is crucial to maintain a balance among them when using them to attain EG, ED, and SD (Case et al. 2009).
Nevertheless, in order to be able to achieve all the above successfully, certain sanctions need to be taken into consideration by all stakeholders concerned. Sanctions with respect to EG include but are not limited to the following: First, EG depends on FP which are limited, so their optimal use is essential to prevent their depletion. Second, measuring EG correctly is fundamental so as to determine how nations’ economies are developing; hence, it needs to be done on the short- and the long-run venues. Third, EG achievement varies among the different countries, where each country’s conditions affect the way its FP use the resources available. Finally, to promote EG, incentives to investors whether local or international must be carried on by the government.
As for sanctions regarding ED, first care must be taken not to deplete or destroy all available resources in the process of attaining ED. Second, a key element for the success of ED depends on attaining an improved social welfare implementation, thus improving human capital.
SD on the other hand to be realized, environmental factors come into perspective, where SD main aim is to realize ED while sustaining the environment. Hence, it is here where governments have to intervene. Their intervention is done not only in developing policies and laws but also in amending, enforcing, and continuously updating these policies and laws to monitor and penalize the abuse and destruction of natural resources and the environment. Yet, it is crucial to have all stakeholders (public and private sectors, NGO, etc.) to be involved in these policy and law making in order to achieve the socioeconomic objectives set by the government.
Finally, FP, EG, ED, and SD are intricately connected based on the relationships among input resources and economic, social, and ecological systems. Thus, for EG to be achieved, all FP must be efficiently used. Once EG is attained, social welfare possibilities increase. The minute these possibilities are realized, ED will be reached. Over and above, with the introduction of environmental preservation into the picture together with ED, SD is attained.
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