Total Factor Productivity (TFP)

Total Factor Productivity (TFP) measures how efficiently a country or firm uses all its resources—like labor, capital, and technology—to produce goods and services. It reflects improvements in technology, innovation, management, and processes that boost output without increasing inputs. Essentially, TFP indicates how well inputs are combined and utilized; higher TFP means more output from the same resources, driving economic growth and competitiveness. Changes in TFP often highlight advancements in knowledge, efficiency, and practices that go beyond just adding more resources.