Multifactor Productivity

Multifactor Productivity

Multifactor productivity (MFP) in air transportation increased by 16 percent between 1991 and 2001 (an average annual rate of 1.5 percent), while in the overall private business sector, MFP increased by 10 percent (just under 1 percent annually) (figure 1-3). Thus, the air transportation industry has contributed positively to increases in MFP in the business sector and to the U.S. economy over this period. Data are not available for the same period for rail transportation, but between 1991 and 1999, MFP in this industry increased by 26 percent (an average annual rate of 3 percent).

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 share in total costs. 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 and air transportation sectors only. The Bureau of Transportation Statistics is developing MFP measures for other transportation industries, such as trucking, 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, as of May 2004.