Structural Modelling of Psychological Limiting Factors for Economic Growth

Abstract

The main objective of this paper was to develop a structural model of psychological limiting factors for economic growth. Specifically, the paper aimed to determine the psychological demographic characteristics, psychological environmental factors, psychological human behaviour and psychological economic factors those influence economic outputs in Kagera and Mwanza regions in Tanzania. The paper used the cross-sectional survey/data from Mwanza and Kagera regions. The sample size of the study was 211 individuals, randomly sampled. The data analysed by using Partial Least Square-Structural Equation Modelling (PLS-SEM) method. The study found that psychological demographic characteristics, psychological human behaviour and psychological economic factors have significant direct impacts on economic growth. However, the psychological environmental factors have a negative impact on the economic growth, but it is not statistically significant. Moreover, the study established the quasi-sinusoidal theory of happiness timing, which explains the nature and timing of happiness of an individual on boosting the economic growth, which responds to Easterlin Paradoxical paradigm. The study concluded that the economic output (GDP) in any production system is depends on how economic agents define their own “live value” (psychological well-being) and the level of psychological control of factors of production (subjective well-being). However, the optimality of utility choices of the economic agents’ decision is enclosed by level of happiness (psychological outcome). Hence Kagera region is performing worse because of its low psychological well-being. The paper suggested the implementation of psychological booster strategies (PBS) such as the homing nurtures, mental balance exercises programmes and establishment of youth economic support (YES) centres.