Academic journal article Monthly Labor Review

Tales of Total Factor Productivity

Academic journal article Monthly Labor Review

Tales of Total Factor Productivity

Article excerpt

Have you ever read a biography of an economic concept? Charles R. Hulten of the University of Maryland has written one about total factor productivity. In National Bureau of Economic Research Working Paper No. 7471, "Total Factor Productivity: A Short Biography," Hulten discusses the origins of the concept of total factor productivity and takes us through the decades of its development.

Simply put, total factor productivity, or TFP, relates output to the inputs used in its production. (The more familiar measure of productivity, labor productivity, compares output with only one input, the labor of workers.) TFP is measured as a "residual," using index number techniques. There has been much controversy over the years about how to measure TFP and about how important it is. A number of leading economists have played important roles in the evolution of TFP, among them Nobel Prize winner Robert M. Solow, Dale W. Jorgensen, and the late Zvi Griliches. Hulten discusses their roles in the development of TFP and those of others, including himself, over the course of this 75-page biography. …

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