Total factor productivity

In economics, total-factor productivity (TFP), also called multi-factor productivity, is usually measured as the ratio of aggregate output (e.g., GDP) to aggregate inputs.^[1] Under some simplifying assumptions about the production technology, growth in TFP becomes the portion of growth in output not explained by growth in traditionally measured inputs of labour and capital used in production.^[2] TFP is calculated by dividing output by the weighted geometric average of labour and capital input, with the standard weighting of 0.7 for labour and 0.3 for capital.^[3] Total factor productivity is a measure of productive efficiency in that it measures how much output can be produced from a certain amount of inputs. It accounts for part of the differences in cross-country per-capita income.^[2] For relatively small percentage changes, the rate of TFP growth can be estimated by subtracting growth rates of labor and capital inputs from the growth rate of output.^[2]

^ Sickles, R., & Zelenyuk, V. (2019). Measurement of Productivity and Efficiency: Theory and Practice. Cambridge: Cambridge University Press. doi:10.1017/9781139565981
^ ^a ^b ^c Comin, Diego (August 2006). "Total Factor Productivity∗" (PDF).
^ Robert J. Gordon (29 August 2017). The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War. Princeton University Press. ISBN 978-1-4008-8895-5.

[assets.cambridge.org-1] Sickles, R., & Zelenyuk, V. (2019). Measurement of Productivity and Efficiency: Theory and Practice. Cambridge: Cambridge University Press. doi:10.1017/9781139565981

[Comin_2006-2] Comin, Diego (August 2006). "Total Factor Productivity∗" (PDF).

[Gordon2017-3] Robert J. Gordon (29 August 2017). The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War. Princeton University Press. ISBN 978-1-4008-8895-5.

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