total factor productivity

Total factor productivity (TFP) is a measure of economic efficiency that accounts for factors beyond labor and capital. It represents the portion of output growth that cannot be explained by increases in the quantity of labor or capital inputs. Essentially, TFP reflects improvements in how efficiently these inputs are used.1

Key drivers of TFP include:
* Technological advancements: Innovations and new technologies allow for more output with the same or fewer resources.1
* Human capital: Improvements in the education, skills, and health of the workforce enhance their productive capacity.23
* Organizational improvements: Better methods of organizing production and management practices can boost efficiency.1

TFP is crucial for understanding economic growth, as it highlights the importance of innovation and efficiency in increasing output over time.13