Concepts, methods and purposes of productivity measurement in transportation

This paper discussed alternative concepts of productivity and methods of measurement. Different measures are appropriate for different questions. Partial factor productivity measures, such as the ever-popular labour productivity, are appropriate where disaggregate operational performance is of interest. Labour productivity is also the relevant measure for assessing the long term standard of living of a nation. Total Factor Productivity (TFP) is the appropriate concept for most productivity assessments, including comparisons across firms or industries, or over time. TFP is also relevant for pricing policies and for many public policy questions. However, TFP itself is an ambiguous concept. ‘Shift’ measures of TFP measure productivity gains from fundamental changes in technology or managerial organization. Shift measures require statistical analysis vai estimation of cost or production functions, or via some other decomposition of ‘gross’ measures of TFP. Gross TFP measures productivity gains from all sources: whether due to technical (managerial) progress, or from exploitation of economies of scale, etc. Gross TFP measures are generally appropriate for pricing questions, while shift measures often are appropriate for government policy questions. The paper describes six alternative techniques for measuring gross TFP, and provides guidance as to which techniques might be preferred in a particular situation.