Total and Partial Factor Productivity Measurements
Total factor productivity (TFP) is the best measure when describing national productivity, because it includes all the inputs used. The partial ratios only consider one input. For example the labour productivity ratio gives the labour input that created the GNP output even though changes in output may be due to increased utilisation of capital. Labour productivity figures are often used because the data is readily available.
1. National productivity (total factor productivity) = GNP/labour and capital (usually calculated with one year and compared on a year by year basis)
2. Capital productivity = GNP/capital
3. Labour productivity = GNP/labour value or labour hours (Partial factor measurements)
We have looked at national productivity, now we will concentrate on productivity measurements for the firm. At the national level, there are total and partial factors in productivity measurement, it is the same at the level of the company.