Economic growth increases the size of a country’s economy over time. It can be measured by aggregate measures of additional goods and services such as gross domestic product (GDP).
Generally speaking, there are three different ways to generate economic growth: adding physical capital, adding labor, or making better use of existing resources. Increasing the amount of physical capital in an economy tends to raise overall production. This is because newer, more efficient tools make a given amount of work more productive. An example of this is a fisherman who uses a net rather than a rod when fishing.
There are limits to how much this alone can increase per capita GDP though. The addition of human capital also has its own limitations since there is a limit to how many people can be employed at the same time. This type of growth relies on a steady increase in labor productivity over time. This can be achieved through a wide range of things such as implementing new labor-saving technologies or changing work methods. A computer that takes the place of a human clerk at a tax office can greatly improve labor productivity.
Finally, boosting economic growth often requires improved institutions. These can include the creation of laws and regulations, social norms, and cultural practices. A country with strong institutional features may find it easier to attract global financial investment and increase its productivity. This is particularly true if it already has a high level of human capital and physical capital.