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Productivity, Efficiency, and Effectiveness
Productivity, efficiency, and effectiveness

For all economic entities, be they firms, industries, or entire economies, measures of productivity are ratios of outputs to inputs. For example, the productivity of automobile manufacturers is often measured as the number of labor-hours required to assemble a car. For economies as a whole, the key productivity ratios are those relating gross domestic product (GDP) to a factor of production, for example, labor or capital. Materially abundant economies are generally those that are high in total factor productivity, that is, GDP divided by the total labor and capital employed. As Coase (1998) points out: “The welfare of a human society depends on the flow of goods and services, and this in turn depends on the productivity of ...

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