factor productivity

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The output of a plant, a firm, or an industry per unit of factor input. The factor concerned may be a particular factor only, such as labour or land. Productivity is often used to mean labour productivity, that is output per unit of labour employed, which may rise or fall for a variety of reasons. These include changes in effort, in the quality of labour employed, in managerial efficiency, in technical knowledge, in the amount of other factors, such as capital, which are employed with each unit of labour, or in the level of output when returns to scale are not constant. Total factor productivity relates the value of output to total factor inputs, aggregated at some set of relative prices. This can change through changes in effort, managerial efficiency, or available techniques, or through scale effects when the output level varies.

Subjects: Economics.

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