IE II

land, labor, capital, human resource

Y=AF (N, H, K, L)

Innovation: new products, processes, organizations, management practices, strategies

Entrepreneurs: they commercialize these new products etc.

-classical factors of production

-innovation & entrepreneurship

-institution & policy

1. they provide the classical factors of production (N, H, K, L - infrastructure is a big issue!)

2. they formulate the rule of the game (which determines the payoffs the entrepreneurs get for their activities)

It is about the payoffs of entrepreneurial activities and this determines if this leads to a productive/unproductinve/destructive contribution to society.

It's all about the possibilities, incentives, and profitabiity.

This has then an effect on innovativeness and the dissemination of technological discoveries.

P A P E L

1. private ownership (needs a market economy because of the gains)

2. availability of production factors (start-up stock needed)

3. economic freedom

4. legal protection of property rights

5. political stability, rule of law, regulative quality

6. (democracy)

-out of collectivized agriculture

-liberalization of prices

-more autonomy for state enterprises

-different banking system & stock market

-opening to FDI

pros: outstanding economic development, less poverty, became major player globally

cons: large disparities (income per capita) between the different classes, corruption, negative externalities