Productivity: Measurement Problems
Productivity is a ratio of some measure of output to some index of input use. The meaning and quality of such a measure depends on the definition and quality of its ingredients and on the particular formula and the associated weights used to aggregate the various components into one output or input index. Economists tend to think of productivity as measuring the current state of technology used in producing the goods and services of an economy (or industry or firm), and want to interpret the changes in such a measure as reflecting) ‘technological change’, shifts in the production possibilities frontier. For this purpose, it is usual to focus on one or another version of ‘multi-factor productivity’, where the list of inputs considered extends beyond labour and includes also measures of capital services and also, occasionally the use of materials and other inputs.
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