2.Technological Progress

The quantity of people working in a company or living in a country does not guarantee large economic growth. Even if a country is abundant in natural resources and a strong labor population, if the country is lacking the basic infrastructure for specific technology, such as electric towers for cell phone transmissions, they will be limited in their economic growth. The technological innovation in the county is a decisive factor of economic progress.

3.Investment

Governments are similar to businesses in the way that both need investment to grow. Just as a company gets investments from venture capitalists or shareholders to buy new equipment, governments sell shares of debt in the form of bonds to other nations as a means of raising revenue. An article in the "Concise Encyclopedia of Economics" explains foreign direct investment increases GDP in the short-run, though too much debt may be problematic in the long-run if the nation struggles to pay its debt.

4.Health

Sickness, disease, high infant mortality rates and other health-related problems can detract from the population’s ability to produce goods and services. Therefore, the country’s standard of living is one factor of its economic output.

The main economic characteristic of quality of resources – their productivity. The most important factor defining a standard of living in the country is average labor productivity – quantity of the goods and services created by the worker for one working hour i.e.

Labor productivity = size release / number of hours of working hours.

38 Classical growth theory

In classical (Ricardian) economics, the theory of production and the theory of growth are based on the theory or law of variable proportions, whereby increasing either of the factors of production (labor or capital), while holding the other constant and assuming no technological change, will increase output, but at a diminishing rate that eventually will approach zero. These concepts have their origins in Thomas Malthus’s theorizing about agriculture. Malthus’s examples included the number of seeds harvested relative to the number of seeds planted (capital) on a plot of land and the size of the harvest from a plot of land versus the number of workers employed

39 Theneoclassicalmodel

• The notion of growth as increased stocks of capital goods was codified as the Solow-Swan Growth and that there are diminishing returns to capital and labor increases. From these two premises, the neoclassical model makes three important predictions. First, increasing capital relative to labor creates economic growth, since people can be more productive given more capital. Second, poor countries with less capital per person grow faster because each investment in capital produces a higher return than rich countries with ample capital. Third, because of diminishing returns to capital, economies eventually reach a point where any increase in capital no longer creates economic growth. This point is called a steady state.

The model also notes that countries can overcome this steady state and continue growing by Model, which involved a series of equations that showed the relationship between labor-time, capital goods, output, and investment. According to this view, the role of technological change became crucial, even more important than the accumulation of capital. This model, developed by Robert Solow and Trevor Swan in the 1950s, was the first attempt to model long-run growth analytically.

• Criticisms of the neo-classical growth model are that it does not account for differing rates of return for different capital investments and that the economic life of capital assets has been declining

• Y = A · L^a· С^b

• Y– output in value terms;

• L – work expenses;

• C – capital expenses;

• a, b – the coefficients characterizing degree of increase in output at increase by 1%, respectively, expenses of work and the capital;

• A – the constant coefficient characterizing all qualitative, not expressed in work, production factors (is in the settlement way).