Determinants of (factors influencing) capital accumulation
- The level of savings; the higher the level of savings, the higher the level of capital accumulation on the other hand, the low rate of savings reduces the rate of capital accumulation.
- Level of technology; use of better methods of production like modem machinery increases the productivity of factors of production hence, capital accumulation. On the other hand, use of poor production techniques reduces the productivity of factors of production hence low capital accumulation.
- Government policy; favorable government policies like subsidization, tax holidays encourage investments and this increases the production of commodities hence capital accumulation. On the other hand unfavorable government policy like high taxes discourage investment hence law rate of capital accumulation.
- Level of development of social and economic infrastructure; for example banks, hospitals, micro finance institutions, roads schools, etc. Availability of such infrastructure which is well developed facilitates the production and investments hence capital accumulation. On the other hand, the presence of under developed and poor infrastructure discourages production and investment hence low rate of capital accumulation.
- Political stability; a politically stable country encourages both local and foreign investors hence capital accumulation but a politically unstable country discourages investors hence-low rate of capital accumulation.
- Level of education; high level of education in form of skills and knowledge increases the productivity of labour hence capital accumulation. On the other hand, low level of education limits labour productivity hence low capital accumulation.
- Level of liquidity preference; this refers to the desire by individuals to hold their wealth in cash or near cash form other than investing it in alternative assets. The higher the level of liquidity preference, the lower the rate of capital accumulation and the lower the level of liquidity preference the higher the rate of capital accumulation.
- Degree of availability of market; availability of both foreign and domestic markets encourages production and investments hence capital accumulation, But presence of inadequate markets limits the scale of production hence low capital accumulation. “
- Level of economic stability; if the economy is stable, inform of stable commodity prices and interest rates, this encourages investment hence increased capital accumulation. On the other hand instability in form of inflation discourages investments hence low capital accumulation.
- Level of interest rate; high interest rate charged on loans discourage potential borrowers or investors hence low capital accumulation and low interest rate charged on loans encourage investors hence increased capital accumulation.
- Level of population growth rate; high population growth rates increase the dependence burden which reduces the level of savings. This limits the level of investment hence low capital accumulation. But a low population growth rate reduces the dependence burden hence high level of capital accumulation.
- Degree of availability of entrepreneurs; the presence of individuals who have the capacity to generate new investments and who are innovative leads to capital accumulation and absence of entrepreneurs leads to low capital accumulation.
- Income levels. Low incomes of people in Uganda lead to low investment levels in productive activities due to low capital accumulation
- high capital outflow in form of profit repatriation and expatriate salaries leads to low capital accumulation
CATEGORIES Economics
TAGS Dr. Bbosa Science
