What are determinants of the long-run growth and what are determinants of maintaining of long-run growth? How can be the growth of economy effected, by what factors?

As it could be seen from the production function: Y=A*F(K,N)

There are three determinants of long-run growth of economy. K – stock of physical capital; N – stock of labor force; A – technological progress. By changing these variables the growth of a particular economy could be changed. Physical capital, human capital and technological progress have a direct effect on the economy, but there is another variable that has an indirect influence. This is an infrastructure that is created by the laws, government policies and institutions. The growth of an infrastructure is devoted to encourage, enable and co-ordinate behavior of economy subjects that causes steady accumulation of human capital, physical capital and technical knowledge, which generate sustain long-run economy growth. In order to have an increase of total output (Y) the inputs should be increased (physical capital, K, and/or labor capital, N) or improvement in productivity (development of technology, A). Production function has a diminishing marginal effect that means that with every increase of inputs the effect of this increase will be less than it was before. Let’s have a look at each determinant more precisely.

Physical capital. If we give worker a more powerful tool to work then the productivity of his work will increase. Such a measure that changes the productive power of a worker is called physical capital and the process of providing workers with more powerful tools is termed capital deepening. Physical capital (factories, machine tools, computers or transportation equipment) expands the economy’s capacity to produce goods. The stock of physical capital could be increased by investment. The necessary economic condition for making investment is savings, a share of current income from current consumption. Hence, economies with higher saving rate will invest more in their physical capital and in economy itself. The example of that over the last 50 years could be Asian countries such as Japan, Singapore, South Korea, which have had high saving rates (25-30% of GDP) had also high growth rates (5-7% of annual rates of increase of GDP per-capita). In comparison to countries such as India and Bangladesh with low saving rates (5-15% share of GDP) have also low growth rates (1-1.5% annual rates of increase in GDP per-capita). According to Jorgenson and Stiroh (2000) (after Elwell, 2006) the effect on the long-term of the U.S. economy growth is attributed to 50% of total growth to capital deepening.

Moreover, physical capital embodied with new techn