Many economic researchers believe that factors that drive economic growth are many and that they are either drivers of economic growth, or they act as stimulants to the process. Some of the factors that economists call stimulants include tax revenues, governmental spending, technology diffusion, innovations, international trade, government policies (such as those on property rights), regulations, and the level of capitalization in a society. The fact that some factors are stimulants to economic growth is evident in the level of consumer confidence that is a key determinant of the level of economic activity. Another factor that is stimulant is technological diffusion, especially when new products are created that are able to be sold for more than their production costs.
One of the most important factors that drive economic growth is capital formation in a country or in a neighborhood. Capital formation is the process by which money is saved and invested for the generation of future economic income. It is a process that can take many forms–private saving and investment through business formation, and the investment of public funds in infrastructure, education, research, and other public projects. The process of capital formation can be extremely slow or can accelerate very quickly depending on the conditions that prevail in a country's economy.
Economic growth is also affected by how well people understand and apply the principles of economic activity, the rules of the market, the value of money, and the role of governments in encouraging economic activity and growth. The value of money is understood in terms of its ability to enhance the welfare of a society as a whole. When people have full confidence in the value of money, they will spend it with sound reasoning and their money will not get stuck in a gray area that could cause inflation.
Another key factor that drives economic growth is the level of education and technology. The level of education and technology determines the number and quality of jobs available to an individual or family. The better the quality of jobs available, the greater the likely that people of a higher skill level will be able to acquire the positions that they desire. And the more advanced and technologically advanced a society is, the more efficient the distribution of economic goods and services will likely be.
Economic growth also depends on governmental institutions. Just as individuals and families form relationships with public agencies such as local, state, and federal governments, so do business firms form relationships with local, regional, and national government bodies. For example, trade unions and other cooperatives often represent specific segments of society, such as women, students, and minorities, and they exert substantial pressure on employers to ensure that their workers receive fair wages and favorable working conditions. Similarly, major cities are hubs for important economic activities, such as tourism, research, and development, and they also play a major role in ensuring that the central government keeps the overall economy running smoothly.
Some final factors that drive economic growth are the attitudes and behaviors of the population and the state of the overall economy. Policies that are favorable to the economic well-being of the population are more likely to be successful. Similarly, policies that protect the environment are generally viewed in a positive light by the . . . . . . population and businesses. These variables may interact in a complex fashion, but there are many common threads that bind the economic policies of different countries together. In fact, most nations around the world have formulated their own version of an economic policy, which are sometimes referred to as macroeconomic policies.