Economic growth is a global phenomenon that helps reduce poverty and improve living standards for billions of people around the world. It can be measured and tracked by national governments and non-governmental organizations such as the National Bureau of Economic Research in the United States.
There are many causes of economic growth, and each country has its own unique characteristics. However, there are some common features. Economies need a sufficient amount of capital and labor in order to grow. This can be created by saving and investing, or through technological advances that increase the productivity of existing resources. In the latter case, the most important factor is innovation. New ideas that enable more work to be done with the same inputs (increased output per unit of resource) are driving forces behind continuing (long-run) economic growth. For example, the invention of computerized tax-filing software enabled more people to file their taxes online and reduced the time required for each transaction.
A growing economy also increases the size of the pie, reducing the sting of scarcity. But a larger pie does not necessarily mean more slices for everyone, since each additional slice comes with an opportunity cost—the next best alternative that was given up to secure the extra good or service.
While economic growth has made people in rich countries much better off and pulled many millions of people out of extreme poverty, it is not an unqualified benefit. The type of growth and the policies that promote it have an enormous impact on people’s lives. For instance, recent research shows that economic growth has been correlated with rising life expectancy and infant health across a wide range of countries.