TOTAL FACTOR PRODUCTIVITY GROWTH

Total factor productivity growth (TFPG) measures the increase in output not due to the increases of inputs, usually capital and labor. The first part of the paper examines the concept and why TFPG is necessary if output is to continue to grow over long periods of time. Some discussion of measurement issues follows in which special attention is given to problems in the use of intercountry regressions. An array of stylized facts is reviewed and the inadequacy of our capacity to explain these facts emphasized. Several 'stories' are then presented which, it is maintained, illustrate important aspects of TFPG not captured in the usual form of regression analysis. In the last section some of the implications of the stories for more formal analysis and policy making are briefly noted