Analysis of profit-linked total-factor productivity measurement models at the firm level

The purpose of the paper is to present the results of a comparative analysis of two main-line productivity measurement procedures: the American Productivity Center’s total factor model, and the Ethyl Corporation’s ‘Profitability=Productivity+Price Recovery’ model. Several fundamental differences between the two approaches are identified and analyzed. As demonstrated in the paper, differences such as the method of deflation can substantially affect the proper choice of the more appropriate procedure to use in a given corporate setting.