The Impact of Total Factor Productivity Growth on Food Manufacturing Industry in Malaysia (1975-2000)\ud

Total factor productivity growth (TFPG) is one determinant of efficiency and effectiveness with both labour and capital resources are used to produce output. In other words, total factor productivity (TFP) means making smarter and better use of the labour and capital resources available. In the past, the Malaysia economy was propelled by input-driven growth. Labour was the main source of economic growth in the 1960s and 1970s; and capital, in the 1980s. Making the best use of our labor and capital resources, and putting in place systems that will encourage innovations and achieve greater output per unit input must sustain Malaysia's economic growth. We now have to depend more on TFP growth to increase the economy's output. For companies, better TFP performance means higher profitability. Larger profits make possible reinvestment and further expansion of business. For employees, the rewards take the form of higher wages and bonuses, more benefits, better work environment and job security. Above all, higher TFP gives all of us the means to enjoy a higher standard of living. In this paper TFPG has been measured by applying the Divisia index for Malaysian food manufacturing industry for the 25 years period of study. In this study to find out about TFPG Auto regression estimator was applied to two model generated from a production function to measure the shift in the production function of Malaysia food industry. To avoid autocorrelation the estimator was applied to time series data for the food manufacturing over the period 1975-2000