Explain the relationship between investment in human capital• (education and training) and gross domestic product (GDP).

Explain the relationship between investment in capital (factories, machinery, and technology) and gross domestic product (GDP.

SS7E7 The student will describe factors that influence economic growth and examine their presence or absence in Israel, Saudi Arabia, and Iran.

How a country manages its productive resources (natural,

capital, and human) can make a large difference in the success of

its economy.

Investment in education and training of a country’s people has a

direct correlation in a country’s Gross Domestic Product.

Israel believes that a quality education system builds a productive work force. Therefore, Israel has highly educated

workers, with scientists, engineers, and entrepreneurs.

Literacy rate: 99%males 96% femalesGDP per capita: $31,400

Israel makes investment in its capital resources too. Israel has a

modern infrastructure and supports its technology industry.

Israel encourages entrepreneurship by offering:

*a tax structure which is positive to small businesses

* a technological program that assists research and developmental projects

* a program that trains immigrants and people over 55 to start their own businesses.

Saudi Arabia has a healthy GDP because its economy is supported by oil. However, the Saudis have recognized that the oil supplies will not last forever.

Many of the skilled workers in Saudi Arabia are there from other countries because the Saudis have a shortage of skilled workers. The Saudi government

is exploring other ways to keep the economy strong.

Over the past decades, the Saudi government has invested in human capital by sending university

students abroad to study.However today, the government is in the early stages of completely revising their education

system. The Saudi government realizes that a good

education system is necessary for continuous growth.

Saudi Arabia Literacy rate: 90% males

81 % females

GDP per capita: $24,500How do you think literacy rate

affects the Gross Domestic Product?

Only about 1/3 of the Saudi Arabia roads are paved.

This makes transporting oil from the fields to the industrial centers very difficult.

However, building roads on the

desert terrain is not an easy task..

So, Saudi Arabia is investing in their capital investment by building a massive railway project to help

make transporting easier. Saudi Arabia is also building

factories and modernizing its infrastructure.

To expand its economy even further, Saudi Arabia is planning to build new cities. One

is the King’s Economic City which will be wired for the highest speed internet in the

world.

Saudi Arabia is trying to diversify its economy and is helping people become entrepreneurs by:

*cutting the time it takes to meet government requirements to start a business

*starting an entrepreneur institute to lend support

However, Saudi Arabia still has some rigid employment laws that are discouraging to many would –be entrepreneurs.

Iran’s Economy

Iran’s economy relies heavily on oil.

In fact, oil provides the government with 85% of its income.

Iran continued

Over the years, Iran’s lack of investment in its people (human capital) has caused many problems including unemployment and lack of training for jobs that are available.

The education system in Iran is very weak, so educated Iranians are seeking jobs in other countries. Many Iranian university professors are also seeking teaching jobs in foreign countries, because the Iranian government controls everything that is taught in Iran.

The Iranian government is beginning to acknowledge this drain on Iranian

talent and is increasing its investment in human capital.

The government is raising the priority in education and its literacy rate. The government is building new schools

and expanding its public colleges.

Iran’s health care compared to Iraq and United States

Iran’s literacy rate:Males 84%

Females 70%GDP per capita: $13,200

Why do you think the literacy rate is so much lower for women in both Saudi Arabia and Iran?

The Iranian government is also realizing that its lack of investment

in capital has impacted its economic growth. In the past, very

little of the oil profits have been used to improve the oil facilities.

Recently, Iran is increasing its investment in capital by investing in its telecommunication system, roads, and machinery.

Entrepreneurs in IranThe number of entrepreneurs in

Iran is small, but growing.

It is not easy to be an entrepreneur in Iran.

Credit (loans) are hard to obtain.

Hard to find good managers

Because Islamic law (Sharia law) prohibits women from many careers, some Iranian women are starting small businesses and running them from their homes.

Information for chart

Investment in Human Capital

Israel – has quality education

Saudi Arabia – sends university students abroad, the country is in the process of updating their education system.

Iran- not much investment, educated Iranians are leaving the country.

Investment in capital

Israel – commited to investing in the infrastructure and technology

Saudi Arabia- planning massive railway and road projects to increase transportation within the country

Iran- lack of capital investment has hurt the growth of the country’s economy

Supporting entrepreneurs

Israel – positive environment for entrepreneurs

Saudi Arabia – providing incentives to support entrepreneurs in order to diversify their economy

Iran – entrepreneurs have many obstacles in starting a business

IS oil a major factor in their economy?

Israel – no, because they do not have oil as a natural resource

Saudi Arabia – yes

Iran - yes