Posts Tagged ‘structural changes’

Impact of Structural Changes on Economy

First of all, a distinction should be made between cyclical and structural changes.

Cyclical changes arise as a result of the economy progressing through the various stages of its business cycle.

Structural changes, on the contrary, arise as a result of a major shift in how the economy functions.

In particular, there are four main types of structural shifts that may impact on economy:

1. Demographics:

The economy is largely influenced by the spending power of its population.
Hence, the development of the economy has been heavily influenced by the spending habits of this generation.

2. Technology:

The same innovation in technology may simultaneously give birth to a new industry and severely impair an existing one.

Collectively, if new technology improves productivity levels, then the economy as a whole will function more efficiently.

3. Politics:

New governments may mean different fiscal policies for the foreseeable future. This may boost certain industries while damaging others.

4. Regulations:

New regulations may make certain industries less competitive, while others may become more competitive.