Definition of Productivity
"Productivity is the effective use of innovation and resources to increase the value-added content of products and services. It is the true source of competitive advantage that creates long term economic viability and a better standard of living for all".
Oxford Definition for Productivity
The state or quality of being productive: the long-term productivity of land- the effectiveness of productive effort, especially in industry, as measured in terms of the rate of output per unit of input: workers have boosted productivity by 30 per cent
- Ecology the rate of production of new biomass by an individual, population, or community; the fertility or capacity of a given habitat or area: nutrient-rich waters with high primary productivity
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DIFFERENT TYPES OF PRODUCTIVITY MEASURES
• Single factor productivity (SFP) defined as the ratio of a measure of output
quantity to the quantity of a single input used.
• Labour productivity (LP) defined as the ratio of a measure of output
quantity to some measure of the quantity of labour used, such as total
hours worked.
• Multifactor productivity (MFP) defined as the ratio of a measure of output
quantity to a measure of the quantity of a bundle of inputs often intended
to approximate total input.
• Total factor productivity (TFP) defined as the ratio of a measure of total output quantity to a measure of the quantity of total input.3 Most of the usual productivity growth measures can be defined in terms of the growth4 or change from s to t in an associated productivity level measure,where t denotes the production scenario of interest and s denotes the comparison scenario.5 Thus, we usually have
(1) SFPGs,t = SFPt / SFPs ,
(2) LPGs,t = LPt / LPs ,
(3) MFPGs,t = MFPt / MFPs , and
(4) TFPGs,t = TFPt / TFPs .
All of the productivity indexes we consider have some measure of output quantity or change in the numerator and some measure of input quantity or change in the denominator. A key issue in the construction of variables of input and output quantity is that they should only change in response to changes in quantity. If a factory produces a constant 10 widgets a day as its output, the output quantity measure should reflect this constancy in output quantity, even if the price for the widgets and the revenues generated change daily. If only one good is under consideration, quantity data can be used directly, without any price or value share information. In contrast, “constant” relative price or value share information is needed when multiple inputs or outputs are involved. In the section on the general N input and M output case below, we demonstrate how this adding up problem is handled in productivity measurement.
