TFP measures the increase in output of an economy from a fixed amount of labour and capital inputs. It will be higher for an economy which has a lot of “easy wins” in terms of increasing output, for instance urbanising a population or modernising its production.

TFP is long-term and thematic in nature. It is positively affected by new technology and negatively affected by overhangs which slow organic value creation such as burdens on business, commodity price inflation, or an overhang of debt.

Economic growth can broadly be broken down into 3 components: increase in working population, increase in the capital stock, and TFP (total factor productivity).