Home » Eng Accounting » T » Total factor productivity (TFP)

Total factor productivity (TFP)

The portion of output that is not explained by measured quantities of inputs into the production process. TFP (also called multi-factor productivity) is usually interpreted as a measure of the level of technology, so an increase in TFP reflects technological advance.

Total factor productivity

The rate of growth of TFP (the growth rate of technology) is measured by the Solow residual, under the assumption of competition in factor markets.

Reference: Oxford Press Dictonary of Economics, 5th edt.