Total Factor Productivity

Total Factor Productivity (TFP) measures how efficiently all inputs—such as labor, capital, and materials—are used together to produce output. It reflects improvements in technology, innovation, or organizational efficiency that enable more goods and services to be produced without increasing the input amounts. Essentially, TFP gauges the "additional" output generated from the same amount of resources, highlighting the role of knowledge, techniques, and management in boosting overall productivity and economic growth.