Total Factor Productivity

Description

Young Yoon:

"Total Factor Productivity (TFP) is the portion of output growth that cannot be explained by increases in labor or capital inputs alone.

In other words, given fixed amounts of labor, capital, and raw materials—the "visible" factors of production—TFP measures how much additional output is generated by "invisible" factors such as technological progress, organizational innovation, and improvements in labor–management relations. TFP is therefore an indicator of overall production efficiency.

Unlike labor productivity alone, total factor productivity reflects a composite effect of workers' skills and task capabilities, capital investment intensity, and technological advancement. As a result, TFP is widely used as a key analytical tool for evaluating productivity and economic performance."

(via email)