Final answer:
Economic development leads to rising incomes and a reduction in poverty by transitioning labor to more productive sectors, technological advancements, and improvements in human and physical capital within a market-oriented economy.
Step-by-step explanation:
Positive effects of economic development include rising incomes and a reduction in poverty. Economic growth allows a shift from agriculture to more productive sectors, facilitating income increases. High-income countries often focus on developing new technologies, while middle-income countries aim to boost human capital and technology connectivity. For low-income countries, investments in health, education, and infrastructure are crucial for joining the global economy and fostering their own technological advancements.
Market-oriented economic reforms have contributed to increased standards of living across the globe. These reforms, along with improvements in human capital, physical capital, and technology, are fundamental to growth. However, maintaining these growth rates can be challenging, especially for countries trapped in poverty needing basic investments in health, education, and infrastructure. The rise in living standards has been dramatic in many regions, including East Asian Tigers, Latin America, and Eastern Europe.
It's also essential for low-income countries to integrate more into the global economy and select technologies suited to their specific needs. Additionally, economic development often comes with institutional and cultural changes necessary for sustained and widely shared gains in per capita real GDP. Globalization and free trade can also support this process by improving productivity and standards of living worldwide.