Major issues in productivity measurement validity

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Major issues in productivity measurement Validity: Dose it Measure what it is supposed to Measure? Reliability: Is the Measure Consistent over Time? Example 1: AT&T Telephone Company No. of L.D.C.: Ope. Hour Req: Labor Product: 1910 100,000 1,000 100/ope.-hour 1980 100,000 10 10,000/ope.-hour
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Major issues in productivity measurement Example 2: Two Manufacturing Plants Output/year No. of Worker Labor Product Capital Invt Plant A 5,000 500 10 units/per worker 1,000,000 Plant B 10,000 500 20 units/per worker 10,000,000
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Why total factor productivity? Market competition: A need for a valid, reliable, accurate, complete, comprehensive and cost effective productivity measurement. Market changing trends: 1. cost structure change 2. method of allocating fixed cost change 3. product life cycle length change (shorter) 4. new product innovation rate change (higher) 5. production more dynamic oriented
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Why total factor productivity? How to calculate TFP? More complicated than single partial productivity index.
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