Comparing Total Factor Productivity and Price Performance

Productivity is normally measured by output-input comparisons, either with index numbers or as a shift in an econometric cost (or production) function. Productivity enables output price increases to be less than the increases in input prices. The link between productivity, prices and profitability has been recognised in the management literature, but little attention has been paid to it in the economics literature. In this paper the links between productivity and price performance are examined using data derived from index-number studies and illustrated for Canadian railways 1956-95.