CAPITAL GENERATION AS A CONTRIBUTION TO ECONOMIC DEVELOPMENT

Economic development is a relatively new field of economics that started only thirty years ago. Many of the measurements applied in measuring the effectiveness of small businesses are based on measuring growth, which is not always directly related to development. Using capital generation as one of the measurable parameters in economic development, a model was designed to measure the contribution of small business towards capital generation and, subsequently, development. The model considered the contribution of small businesses towards capital generation by measuring growth in assets, owners’ incomes, employees’ incomes and taxes paid. For these parameters to contribute to growth, additional capital needs to be generated by businesses. Job creation was also measured as an important parameter used to calculate employees’ and owners’ incomes. The model can be used to analyse business ontributions to development. The results and the analyses show that the model can be used as a successful management tool to analyse development- related initiatives.