Economic growth is something you hear about all the time—whether from your banker, investment adviser or your favorite economist. Faster economic growth expands the overall size of a country’s economy and strengthens fiscal conditions, while broadly shared growth in per capita GDP increases the typical person’s material standard of living.

The world’s economy has more than doubled since the start of the 20th century and average global income has nearly tripled, powered by both population growth and a healthy increase in labor productivity. That’s not a coincidence.

A country’s gross domestic product (GDP) is the total value of everything produced within its borders, including tangible goods such as machines, factories and offices and intangible services such as research and development. Economists also measure economic output relative to materials consumed, which is called “material productivity.”

Economic growth has two primary sources: growth in the number of people working and growth in the productivity of those workers. More workers can increase GDP, but higher productivity enables people to achieve the same material standard of living with fewer hours spent in the workforce. The most significant contributor to economic growth is technological advances, which account for about 40 percent of productivity gains. Better resource allocation and economies of scale explain another 15 percent of productivity gains. Inequality is also important; more equal distribution of savings and capital boosts the rate at which new capital is created, and better access to credit encourages business investment.