Multifactor productivity, or MFP, is a key macroeconomic indicator that informs economists on whether countries are producing goods and services in a smarter way over time, for example by harnessing new technologies and implementing new work practices or product designs.
The standard approaches to measuring MFP that have developed over the past 50 years focus almost solely on economic factors such as investment in computing and other technology and the building of education and skills of staff.
Over the past decade, different approaches to incorporating the environment into MFP have been developed – this is known as environmentally-adjusted MFP, or EAMFP.
In a recent article published in the International Productivity Monitor, IDEEA Group Director Carl Obst discusses the main approaches to EAMFP and its links to the System of Environmental Economic Accounting (SEEA) and the System of National Accounts (SNA).
Carl writes:
‘In the field of productivity analysis, most work remains focused on standard labour and multifactor productivity measurement and resolving a range of measurement challenges: some that are long-standing such as concerning public sector output and some emerging as the economic system continues to evolve, such as digitalization.
A focus on incorporating environmental issues has not been central. Indeed, in a 2019 review article of the Oxford Handbook of Productivity Analysis (Reinsdorf, 2019), the word ‘environment’ does not appear.’
In the article, Carl details:
- the history of the efforts to measure EAMFP
- technical links to the SEEA and the SNA
- some of the issues with the current measurement approaches (including some concerns on potential double counting of environmental contributions and effects)
- suggestions for improvement that incorporate natural capital approaches.
You can read the article here or visit the International Productivity Monitor website for more perspectives on including environmental measures into traditional measurement of productivity.