The role of supply side policies in improving rates of economic growth

Supply side policies are government attempts to increase productivity and the efficiency of markets and the economy.

First of all, supply side policy can do better infrastructure and transport. This can increase the competitiveness of current industry. Also government spending on education and training can overcome the market failure. Better training schemes would increase labour productivity and increse rates of economic growth.

But also there are some disadvantages of supply-side policies, supply-side policies will take a long time to increase productivity, therefore the effect on economic growth will be limited. Also there is no any guarantee that government spending will actually increase labour productivity.

Supply side policies also try to make markets work more efficiently. For example, the government could try to make labour markets more flexible by reducing power of trades unions and making it easier to hire workers. Supply-side policies can make labour markets more flexible and could encourage new firms to enter the market.

Another supply side policy can reduce tax rates. Lower income tax may encourage people to work overtime and encourage more people to move to UK. However, there is no any guarantee that lower income tax will make people work harder.

Productivity growth is one of the most important factors for influencing long term economic growth. The growth of aggregate supply determines the long run rate of growth.