Sunday, April 12, 2015

Total Factor Productivity

Total Factor Productivity (TFP) is the portion of output not explained by the amount of inputs used in production. As such, its level is determined by how efficiently and intensely the inputs are utilized in production.
Efficiency in the use of inputs, how steep is your curve. The UK and the USA have it, Europe and Mexico do not. 
From Wiki:
It has been shown that there is a historical correlation between TFP and energy conversion efficiency.



They tell us it is the difference in growth not definied by labor and capital, but that means nothing since capital is a scalar incorrectly composed from a vector. So what was the point of the Solow Growth model if it only modelss 30% of the growth? I suppose Professor Solow wanted to show how ignorant we are in defining capital as a scalar.