The time series of productivity measures and their components for comparing international productivity analysis has been given by the OECD productivity database from year 2003. Specifically, the measures of multi factor productivity are offered by PDB in which there exists a comparison between evolution output with evolution of capital and combined labour inputs. The multi factor productivity series have been formed at the level of entire economies. Through multi factor productivity measures there has been an increase in interest in industry level productivity and it is also useful for many other purposes. The industry level information rises but only for labour productivity, it is calculated by ratio between labour input and output.
The following criteria is used for new productivity measures by industry (PDBi) are
Firstly there should exist complete compatibility among industry level data that is compiled by OECD for its structural analysis database. Data required for measuring output with labour input which is needed to form industry level multi factor productivity is directly obtained from structural analysis database.
Secondly regular updates should be provided in regular intervals because they are required by researchers outside and inside the OECD to form new multi factor productivity data attractive in order to put specific premiums on timeliness. Structural analysis database make sure timeliness through a regular update that is followed closely with possible nations release calendars of industry level data from national accounts. A rolling update process is also required to manage the PDBi.
Thirdly, all the standards which are put forward in OECD manuals for measuring capital and also measuring productivity are reflected by method used for PDBi series. In order to measure the productivity at the total economy level in the PDB must be followed by these recommendations.
The most important factor in measuring the multi factor productivity computation missing in industry is capital input by industry. As a result the main part of project shown here is the formulation of new series of capital measures by industry using a similar method for all the countries. The project has been successful in first and second criteria mentioned above. But in case of third criteria a deviation is imposed by data constraints from recommended practice. There should be use of any simplified method for measuring capital inputs because a particular information by industry and by type of asset in normally not available. Essentially capital stocks are measured in place of capital services. The capital stocks takes no account of differences in the comparative productivity of different types of assets, but the capital services do it and forms the conceptually preferable measure of capital input. This scarcity of data can be corrected as more detailed industry level source data becomes available. But till that time the measures of PDBN I has to be dependent on simplified stock approach.
Productivity measures
Productivity = output/input
Partial measures = output/single input = output/labour = output/capital
Multifactor measures = output/multiple inputs = output/labour+ machine = output/labour +capital +energy
Total Measure = Goods or services produced/All inputs used to produce them
Definition of multi factor productivity and its explanation
The definition of multi factor productivity is output per unit of combined inputs of capital, labour, materials, purchased business services and energy. Now the multi factor productivity is measured both for small scale and large scale industries, it is important that all intermediate inputs like materials, energy and services should be explicitly included. When multi factor productivity is measured for large scale industries of the economy than the actual value added output related to capital and labour inputs. Most of the intermediate transactions are excluded in large scale sector because maximum intermediate inputs are manufactures and used in large scale sector itself hence they cannot be used twice.
The multi factor productivity measure is an index computed by combining annual rates of multifactor productivity growth. The multi factor productivity growth rate is calculated as the growth rate in sectional output less in combined growth rate or aggregate inputs:
ln A = ln Y – ln I
Where, ln represents differences in successive logarithms,
A represents an index of multifactor productivity,
Y represents an index of sect oral output, and
I represents an index of aggregate input.
The aggregate input, I is calculated as a Tornqvist index or five main types of inputs.
But firstly annual rates of growth in aggregate inputs are calculated
ln I = i wi ln Xi,
Where, ln represents the differences in successive logarithm,
Xi represents the quantity index if inputs
And Wi represents averages of factor shares in income for each input (Si) in the current year and previous year:
wi,t = (si,t + si,t-1 ) / 2
Now the aggregate input index is formed as chain index , that is by making I0 equal to 1 in the first year and calculating It for each successive year – one year at a time by using the time series of input growth rates (ln It) and the formula is:
It = It-1 e ln It
As calculated by avaibility of data each main input measure is Tornqvist index of more detailed input category. Normally the quantity indexes for particular inputs at most detailed level should be started form permitted source data.
In same manner, total output is calculated as Tornqvist aggregate of quantity indexes for the output of each utility service, where weights are obtained from quantities and prices of different types of services.
The multi factor productivity index (A) is formed from the multi factor growth rate and in the same manner the aggregate input index is calculated:
At = At-1 e ln At
Importance and significance of measurement of multi factor productivity
The multi factor productivity is used in assessing the productive capacity or productive potential of any economy. Multi factor productivity measure is an useful and very important and significant measure for calculating the growth possibilities of a company and of inflator pressures. The time series of productivity measures and their components for comparing international productivity analysis has been given by the OECD productivity database from year 2003. Specifically, the measures of multi factor productivity are offered by PDB in which there exists a comparison between evolution output with evolution of capital and combined labour inputs. The multi factor productivity series have been formed at the level of entire economies. Through multi factor productivity measures there has been an increase in interest in industry level productivity and it is also useful for many other purposes. The industry level information rises but only for labour productivity, it is calculated by ratio between labour input and output.
Multi factor productivity is used to calculate complete efficiency with which labour and capital both the inputs are applied together in the process of production. If there comes any type of changes in multi factor productivity represents the effects of changes occurring in management practices, organizational changes, network effects, brand names, adjustment costs, general knowledge, spill overs from production factors, the impact of imperfect competition, measurement errors and economies of scale.
Multi factor productivity are widely applied in businesses, governments and economists to compute and compare the usefulness in comparison with productivity for given sector, industry or economy. Normally we can multi factor productivity is used to represent the actual value of output in relation with combination of input values.
Application of inputs and outputs and measuring multi factor productivity in Emaar Properties
Emaar properties are incorporated in 1997 located in United States of Arab. It is listed in Dubai financial markets as DFM; EMAAR. It is a public joint stock company. It is an internationally operated company providing property development and management services.IT is providing services in 36 international markets including Europe , North America, Middle east<pan Asia and North Africa. It is almost 60 subsidiaries and operating in six different segments. It is famous for its large scale real estate projects and considered as the largest property developers in UAE.The tallest building in world Burj Khalifa is built by Emaar properties.
The subsidiaries of Emaar company are Emaar properties, Emaar International, Emaar Hospitality, Emaar Malls, Emaar Hotels and Resorts, Emaar retail, Burj Khalifa, Emaar community Management, Emaar technologies, Emaar Industries and Investments, Amlak Finance, Emaar Investment Holdings. Emaar provides diversified services in property development including commercial and residential property development including malls and hospitals.Iniltially 100 per cent of the company is owned by Dubai government and the founding shareholders are 24.3percent.Emaar is the first real state company offering shares to foreigners.
The Single and multi-productivity both development need proper measures for output and input quantities in construction companies. Basically the measurement of productivity indexes for these construction companies are measures in physical units of measurement. As ratios of economic activities gets more and more aggregated the availability of these data becomes tougher. Some of the other considerations of measurements that can be applied to all construction companies are
• A proper weighting system should be developed if the heterogeneous things get compromised for single component.
• Changes in adjustments in component quality over time.
• Including new kind of inputs and outputs and introduce them into production method.
Output
For more homogenous output it is much easier for Emaar properties to establish some useful measures of the quantity. There is an increase in the proper dollar measures of output it receipts plus in the finished goods inventories values only if the meaningful and useful data is not available. Now we know that in contract the Emaar Construction Company does not hold any inventories, but it receives payments on the basis of completion of project, here there is no need of changing in values of receipts adjusted for inventory changes. In other way, these kind of adjustments have to be done to receipts of operative builders, we define operative builders as those who are engaged in building small family houses and other buildings that are for sale on their own risk rather than other builders. At the time of measuring productivity in construction companies, it is must in spite of avoiding double counting that it must be excluded from the output measure receipts for construction work which is subcontracted. And also other non-construction activities like architectural services and mortgage banking must also be excluded as all these activities are the object of the measurement of productivity.
This figure calculated above must be deflated with an index of output prices other than input costs only if the output measurement is done in receipts.
There is not any possible changes in profit margins are provided by necessary adjustments in input cost indexes nor in productivity itself. For example imagine that receipts are increased themselves as a result of increase in output prices but the input quantities, output quantities and input prices does not change. Hence there will be increase in productivity, though there is no change in ratio of real output to real input. In other hand if there is increase in output quantities then there is increase in ratio of real output though the there is no change in input quantities.
Labour Input
Labour input is calculated in labour hours actually worked which is adjusted for changes in the mix of employed labour categories. The measure for labour input is counted in units as hours worked, where these working hours are counted equally for all kind of workers. The purpose of labour input is limited to maintained workers and utility operations, with assumption that any labour devoted to new construction can be excluded. The definition of output is consistent with definition of labour input in delivering utility services other than a wider concept included in structures completed or can be in progress. In measuring labour hours the hours worked are preferred over hours paid because the indexes of productivity are meant to deal with relations that are technological among output and input measures. If any payment is made for any single hour that is not worked simply raises the compensation that is paid for every hour. By weighing the number of hours worked by each labour category we can evaluate the changes in labour mix by the value of its contribution to output. We can only weigh the hours worked for each labour category by the corresponding average hourly earnings when we suppose that a competitive labour market and each category of labour is paid equal wages equal to its marginal contribution in output.
Materials Input
All inputs are referred in material inputs there is no classification like labour or capital. In dollar terminology, it is calculated by value obtained after subtracting value of that is added to purchased goods and services by a firm’s production method from value of output. Now the materials which one company is using as input are also the output for any other company.
Capital Input
Capital input is toughest component of indexes of productivity for quantifying. It is not like materials output a flow of services is provided by capital that can be extended beyond the current time period. In most of the terms capital is almost same as the labour input that in both cases both gives service flow, service price indexes and service prices that can be observes for labour but not for capital. Hence there is very rare availability of data that can be measured by capital contribution to production over relevant time period. Hence in order to calculate the real capital input several estimating methods are used. Normally real capital input is calculated by multiplying real capital stock with a ratio that shows value of capital services per time period and per unit of capital stock. All the 44 different types of capital assets of source data becomes a part of capital stock measure for SIC industry 49. Stocks of these various assets are used together using weights originated from the estimation of implicit rental prices – these are those prices which different kind of capital would bring on an assumption of rental market. Estimation of these rental prices are done by comparing the capital stocks to estimation of NIPA property income in SIC 49. A proper structured rental price formula is used for each kind of asset, addition of rate of depreciation, subtracting the asset’s rate of price appreciation.
Recommendations
The multi factor productivity measure is an index computed by combining annual rates of multifactor productivity growth. The multi factor productivity growth rate is calculated as the growth rate in sectional output less in combined growth rate or aggregate inputs. The multi factor productivity is used in assessing the productive capacity or productive potential of any economy. Multi factor productivity measure is a useful and very important and significant measure for calculating the growth possibilities of a company and of inflator pressures. The time series of productivity measures and their components for comparing international productivity analysis has been given by the OECD productivity database from year 2003. Specifically, the measures of multi factor productivity are offered by PDB in which there exists a comparison between evolution output with evolution of capital and combined labour inputs. The multi factor productivity series have been formed at the level of entire economies. Through multi factor productivity measures there has been an increase in interest in industry level productivity and it is also useful for many other purposes. The industry level information rises but only for labour productivity, it is calculated by ratio between labour input and output.