Measuring Productivity: Lessons from Tailored Surveys and Productivity Benchmarking

We use tailored surveys and benchmarking in the flat-weave rug industry to better understand the shortcomings of standard productivity measures. Quantity-based productivity (TFPQ) performs poorly because of variation in product specifications across firms. Controlling for specifications aligns TFPQ with lab benchmarks. We also collect quality metrics to construct quality productivity (the ability to produce quality given inputs) and find substantial dispersion across firms. This motivates interest in multidimensional productivity, or capability. As quality productivity is negatively correlated with TFPQ, revenue-based productivity (TFPR) may perform better at capturing capabilities in settings where better firms make products with more demanding specifications that have greater input requirements.