Economists take total factor productivity (TFP) as one of the most informative indicators of the state of

a country's economy, and as a predictor of its future performance. TFP is an indicator of technological

development and on everything going into the production process that is not strictly labour or capital.

TFP growth is important for increasing living standards1 and is a key indicator for European economies,

which have little scope for growth from factor accumulation: labour growth is more constrained than in

developing countries for demographic and labour-market reasons, and capital accumulation is generally

set on a steady-state trend. It is therefore crucial for European economies to allocate these two scarce

input factors in the most efficient way possible (the extent to which this works well is called allocative

efficiency and is one of the drivers of TFP), while improving everything from management practices to

energy efficiency.