Analysis of Total Factor Productivity Contribution to Economic Growth of the Czech Republic

Abstract

Total factor productivity is defined as a relation of product to total factor inputs. Its growth is result of qualitative changes, i.e. intensive factors of growth. For measurement of total factor inputs is used production function with two factors, labor and capital (extensive factors). The paper shows the possibility of direct measurement of total factor productivity. Further, there are derived dynamic parameters which measure the share of intensive and extensive factors in economic growth. They also include the case of fall of product and counter (opposite) changes of growth factors. Average annual growth of real GDP of the Czech Republic between periods 1995-2000 and 2001-2007 accelerated from 1.5 % to 4.5 %. Total factor productivity increased from 1.1% to 3.5 % and was the main factor of this acceleration. Dynamic parameter of intensity in the period of slower growth 1995-2000 shows, that the share of intensive factors was 74 %, while in the period of stronger growth 2001-2007 was 78 % (parameter of extensity was 26 % and 22 % respectively).