Productivity, or efficiency, is the ratio of output production to input effort. The productivity ratio is an indicator of the efficiency with which a system converts its resources (inputs) into finished goods and services (outputs). In short, it’s a measure of the amount of onput per unit of input.
You can get productivity by calculating the amount of outputs obtained by using one unit of inputs. With more than one factors of production, you can calculate the productivity of each factor as partial productivity, or calculate the productivity on the whole considering all factors as total factor productivity.
Many factors affect productivity of an economy: technology, labor force, capacity and so forth. In real world, from a macroeconomic perspective, long-term productivity increase or at least sustaining can be achieved by:
- Capital addition and renewal through yearly investments
- Public investments as in social infrastructure
- Better grand education
- Better management practice
- Innovations, both business innovation and technological innovation
- High level of division of work
- International trade