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. Under some simplifications 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. TFP is calculated by dividing output by the weighted average of labour and capital input, with the standard weighting of 0.7 for labour and 0.3 for capital. Total factor productivity is a measure of economic efficiency and accounts for part of the differences in cross-country per-capita income. The rate of TFP growth is calculated by subtracting growth rates of labor and capital inputs from the growth rate of output. 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. Under some simplifications 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. TFP is calculated by dividing output by the weighted average of labour and capital input, with the standard weighting of 0.7 for labour and 0.3 for capital. Total factor productivity is a measure of economic efficiency and accounts for part of the differences in cross-country per-capita income. The rate of TFP growth is calculated by subtracting growth rates of labor and capital inputs from the growth rate of output. Technology growth and efficiency are regarded as two of the biggest sub-sections of Total Factor Productivity, the former possessing 'special' inherent features such as positive externalities and non-rivals which enhance its position as a driver of economic growth.