Total Productivity Factor

“It has widely been observed that increases in national output have been large compared with the increases of land, man-hours, and physical reproducible capital” (Schultz, 1961, p. 1). Schultz (1961) attributes human capital as the input that fills the gap in understanding where the additional output comes from.


Total Factor Productivity (TFP) is another explanation for this gap. Human capital is one part of TFP. Technology and social capital complete the TFP mix. “Most output growth can be accounted for by input growth, but that the variation in output levels and growth rates is mostly accounted for by variation in [Total Factor Productivity] TFP levels and growth rates” (Taylor, Tamura, & Mulholland, 2013, p. 320). “Economic performance across regions differs not only in traditional factor endowments (labour and physical capital), but also mainly in technological, human and social capital” (Dettori, Marrocu, & Paci, 2012, p. 1411). Dettori, et al. (2012) characterize technological, human and social capital as components of Total Factor Productivity.



Dettori, B., Marrocu, E., & Paci, R. (2012). Total factor productivity, intangible assets and spatial dependence in the European regions. Regional Studies, 46(10), 1401-1416. doi:10.1080/00343404.2010.529288

Schultz, T. W. (1961). Investment in human capital. The American Economic Review, 51(1), 1-17.

Turner, C., Tamura, R., & Mulholland, S. (2013). How important are human capital, physical capital and total factor productivity for determining state economic growth in the United States, 1840-2000?. Journal of Economic Growth, 18(4), 319-371. doi:10.1007/s10887-013-9090-4

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