Total Factor Productivity (TFP)

Total Factor Productivity (TFP) is measured according to the System of National Accounts (SNA) which is maintained by the United Nations. SNA represents the gold standard for the measurement of economic outputs and growth and enables comparisons with both historical data and country data. The outputs in SNA comprise the Firm’s Gross Value Added (GVA) which is made up of the firm’s revenue at market prices less its purchases. Double deflation is then applied to both sales and purchases to enable time series data to be comparable.TFP also defines the rules for how labour services and capital services are to be documented and reported which are not the same as those used by International Accounting standards. A second important point of difference between TFP and International Accounting Standards is that TFP always uses ‘real’ incomes and costs whilst firm level accounts are always nominal (i.e., not adjusted for inflation).