What are economic structural factors?

My answer on Quora:

The structural factors of an economy are those that do not change with the economic cycle. There are structural factors and there are cyclical factors. Think of a trend vs. variations around that trend. Structural factors relate to the supply-side of the economy and cyclical factors relate to the demand-side.

Structural factors include laws (like labor market regulations, antitrust laws, capital requirements), demographics (like the age profile of the population), the relative size of major sectors (like agriculture, industry, or service based economies, or commodity-rich countries), levels of human capital (a concept that tries to measure the skills, experiences and knowledge of people), and more.

Structural factors determine the potential of the supply-side of the economy, i.e. what and how much an economy is capable of producing.

On the other hand, cyclical factors relate to the demand-side of the economy. Cyclical factors include spending and saving, employment and unemployment (though there can also be structural unemployment depending on what the unemployment rate would be when the economy is at its potential – not over or under it), and other factors that rise and fall when the economy is speeding up or slowing down.

-> Structural policies are policies that can impact an economy’s potential from the supply-side. They are long-term in nature.

-> Fiscal and monetary policies are polices that seek to stabilize the demand-side of the economy. They are short-term in nature.



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