Multifactor Productivity

Multifactor Productivity

Multifactor productivity (MFP) in rail transportation increased by 30 percent between 1990 and 1999 (an average annual rate of 3 percent), while in the overall private business sector, MFP increased by 8 percent (less than 1 percent annually) (figure 3). Thus, the rail industry has contributed positively to increases in MFP in the business sector and to the U.S. economy over this period.

While MFP measures are difficult to construct, they provide a much more comprehensive view of productivity than labor productivity measures. The conventional methodology for calculating multifactor productivity, which is used here, employs growth rates of inputs weighted by their income shares. This methodology has been developed and used by various academic researchers and government agencies, such as the Bureau of Labor Statistics.1

Transportation MFP data are currently available from the Bureau of Labor Statistics for the rail sector only. The Bureau of Transportation Statistics is developing MFP measures for other transportation industries, such as air, pipelines, and so on. The objective is to provide information on the relative importance of changes in the inputs and on the productivity of the inputs relative to changes in transportation output. This research should also provide information on the relative importance of transportation in increasing the productivity of the U.S. economy and, hence, transportation’s contribution to the economic growth of the country.

1 See, for instance, discussion on MFP by the Bureau of Labor Statistics in the BLS Handbook of Methods, available at http://www.bls.gov/opub/hom/homch11_a.htm.