There are considerable differences in the levels of income between countries observed all over the world. The primary factor that causes this difference is the existence of an open market in certain countries, which attracts people from developing countries and enormous investments that generate opportunities for new businesses and sectors to grow and create a high income for companies and individuals. One of the outcomes of an open market is the efficient use of resources, including natural, labor, and capital resources. These countries move towards achieving high levels of productivity by managing their resources efficiently and in a cost-effective manner, which helps them to achieve a higher economic rate, and more goods are produced and consumed that generates high-income levels. As a result, a more substantial proportion of individuals is drawn out of poverty. The free market implies that the government does not interfere with market forces, and individuals have equal opportunities to work. Therefore, individuals can freely earn and improve their living standards. The weak form of government leads to inefficient use of resources and is often only controlled by a small, powerful group.
Countries with high levels of income also have a robust institutional structure that protects intellectual and property rights support a free market and ensure adherence to laws set out by the government for businesses and individuals. In such an economy, companies not only concentrate on producing goods but also invest in improving their operation and products. They put more funds into their research and development programs and even adopt new technologies that make them more competitive and earn a higher income.
Moreover, governments can give financial incentives to companies to increase their production and operational coverage. The role of institutions is crucial for thriving markets and high economic growth. The low-income countries have a weak government and institutional structure, which makes it challenging for businesses to flourish and generate employment for new graduates who enter the market every year. Small and medium-sized enterprises play an important role in creating job opportunities for individuals, but they fail to compete against large corporations in poorly governed economies. It is the reason that such countries fail to achieve high economic growth and income.
Furthermore, economies that have fewer or no trade barriers also have higher levels of income. These countries create opportunities for companies to invest in their different sectors and create more employment and income for their people. Moreover, companies can benefit from trading in a massive global market and achieve higher levels of productivity.