Multifactor Productivity: A Source of Competitive Advantage

Multifactor productivity (MP) is one of the main reasons that the U.S. has any chance of holding any semblance of an economic leadership role in the world.

What is it? MP is the growth in output in excess of the contribution from labor and physical capital. The latest multifactor productivity were released by the Bureau of Labor Statistics recently. (PDF report download).

In short, the BLS report says that during the 2000-2004 period, output per worker hour (labor productivity) rose at a 3.6% annual rate. Here are the respective contributions of the associated factors: 1.2 percentage points from capital, 0.5 percentage points from improvements in the quality of labor, and quite importantly 1.9 percentage points from multifactor productivity.