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Learning by Doing and Aggregate Fluctuations

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Author Info
R Cooper
Alok Johri

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Abstract

A major unresolved issue in business cycle theory is the construction of an endogenous propagation mechanism capable of capturing the persistence displayed in the data. In this paper we explore the quantitative implications of one propagation mechanism: learning by doing. Estimation of the parameters characterizing learning by doing is based on aggregate, 2-digit and plant level observations in the US. The estimated learning by doing function is then integrated into a stochastic growth model in which fluctuations are driven by technology shocks. We conclude that learning by doing can be a powerful mechanism for generating endogenous persistence. Moreover learning by doing modifies the labor supply decision of the representative agent making it forward looking. This has a number of implications for the interpretation of labor supply shifts as “taste shocks” and the cyclical utilization of labor which we explore in the paper.

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Paper provided by McMaster University in its series Department of Economics Working Papers with number 2000-02.

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Length: 47 pages
Date of creation: Feb 2000
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Handle: RePEc:mcm:deptwp:2000-02

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  1. Canadian Macro Study Group
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Basu, Susanto & Fernald, John G., 1995. "Are apparent productive spillovers a figment of specification error?," Journal of Monetary Economics, Elsevier, vol. 36(1), pages 165-188, August. [Downloadable!] (restricted)
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  2. Cooper, Russell W. & Johri, Alok, 1997. "Dynamic complementarities: A quantitative analysis," Journal of Monetary Economics, Elsevier, vol. 40(1), pages 97-119, September. [Downloadable!] (restricted)
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  3. Marianne Baxter & Robert G. King, 1991. "Productive externalities and business cycles," Discussion Paper / Institute for Empirical Macroeconomics 53, Federal Reserve Bank of Minneapolis. [Downloadable!]
  4. Katz, Lawrence F & Meyer, Bruce D, 1990. "Unemployment Insurance, Recall Expectations, and Unemployment Outcomes," The Quarterly Journal of Economics, MIT Press, vol. 105(4), pages 973-1002, November. [Downloadable!] (restricted)
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  5. Ronald S. Jarmin, 1994. "Learning by Doing and Competition in the Early Rayon Industry," RAND Journal of Economics, The RAND Corporation, vol. 25(3), pages 441-454, Autumn. [Downloadable!] (restricted)
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  6. Burnside, Craig & Eichenbaum, Martin & Rebelo, Sergio, 1993. "Labor Hoarding and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 245-73, April. [Downloadable!] (restricted)
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  7. Bahk, Byong-Hong & Gort, Michael, 1993. "Decomposing Learning by Doing in New Plants," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 561-83, August. [Downloadable!] (restricted)
  8. Cooper, Russell & Haltiwanger, John, 1996. "Evidence on Macroeconomic Complementarities," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 78-93, February. [Downloadable!] (restricted)
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  9. Basu, S., 1993. "Procyclical Productivity: Overhead Inputs or Cyclical Utilization," Papers 93-25, Michigan - Center for Research on Economic & Social Theory.
  10. Timothy Cogley & James M. Nason, 1993. "Output dynamics in real business cycle models," Working Papers in Applied Economic Theory 93-10, Federal Reserve Bank of San Francisco.
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  11. Burnside, Craig & Eichenbaum, Martin, 1996. "Factor-Hoarding and the Propagation of Business-Cycle Shocks," American Economic Review, American Economic Association, vol. 86(5), pages 1154-74, December. [Downloadable!] (restricted)
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  12. Cooper, Russell & John, Andrew, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, MIT Press, vol. 103(3), pages 441-63, August. [Downloadable!] (restricted)
  13. Lawrence J. Christiano & Martin Eichenbaum, 1990. "Current real business cycle theories and aggregate labor market fluctuations," Discussion Paper / Institute for Empirical Macroeconomics 24, Federal Reserve Bank of Minneapolis. [Downloadable!]
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  14. Irwin, Douglas A & Klenow, Peter J, 1994. "Learning-by-Doing Spillovers in the Semiconductor Industry," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1200-1227, December. [Downloadable!] (restricted)
  15. Christiano, Lawrence J & Eichenbaum, Martin & Evans, Charles, 1996. "The Effects of Monetary Policy Shocks: Evidence from the Flow of Funds," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 16-34, February. [Downloadable!] (restricted)
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  16. King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232. [Downloadable!] (restricted)
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  1. Fabiano Rodrigues Bastos, 2007. "Organizational Capital, Learning-by-Doing and Investment Volatility," Economia, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 8(3), pages 463–475. [Downloadable!]
  2. Hafedh Bouakez & Takashi Kano, 2005. "Learning-by-Doing or Habit Formation?," Working Papers 05-15, Bank of Canada. [Downloadable!]
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  3. Fransisco M. Ganzalez & Alok Johri, 2002. "Asymmetric Labor Adjustment, Organizational Capital and Aggregate Job Flows," Department of Economics Working Papers 2002-03, McMaster University. [Downloadable!]
  4. Alok Johri & Amartya Lahiri, 2008. "Persistent Real Exchange Rates," Department of Economics Working Papers 2008-04, McMaster University. [Downloadable!]
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  5. Yongsung Chang & Joao Gomes & Frank Schorfheide, 2002. "Learning by Doing as a Propagation Mechanism," Macroeconomics 0204002, EconWPA. [Downloadable!]
    Other versions:
  6. Christian Calmès, 2003. "Poignée de main invisible et persistance des cycles économiques : une revue de la littérature," Working Papers 03-40, Bank of Canada. [Downloadable!]
  7. Adnrew J. Clarke & Alok Johri, 2008. "Pro-cyclical Solow Residuals without Technology Shocks," Department of Economics Working Papers 2008-02, McMaster University. [Downloadable!]
    Other versions:
  8. K Blackburn & A Pelloni, 2001. "On the Relationship Between Growth and Volatility in Learning-by-Doing Economies," Centre for Growth and Business Cycle Research Discussion Paper Series 01, Economics, The Univeristy of Manchester. [Downloadable!]
  9. Takayuki Tsuruga, 2004. "Hump-shaped Behavior of Inflation and Dynamic Externality," Econometric Society 2004 Far Eastern Meetings 614, Econometric Society. [Downloadable!]
  10. Yongsung Chang & Joao Gomes & Frank Schorfheide, 2000. "Persistence," Econometric Society World Congress 2000 Contributed Papers 1632, Econometric Society. [Downloadable!]
  11. A. Johri & M-A. Letendre, 2001. "Labour Market Dynamics in RBC Models," Department of Economics Working Papers 2001-03, McMaster University. [Downloadable!]
  12. Alok Johri, 2005. "Learning-by-doing and Endogenous Price-level Inertia," Department of Economics Working Papers 2005-02, McMaster University. [Downloadable!]
  13. Hammad Qureshi, 2009. "News Shocks and Learning-by-doing," Working Papers 09-06, Ohio State University, Department of Economics. [Downloadable!]
  14. Andrew Clarke, 2008. "Learning-by-Doing and Productivity Dynamics in Manufacturing Industries," Department of Economics - Working Papers Series 1032, The University of Melbourne. [Downloadable!]
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