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Learning by Doing and Aggregate Fluctuations

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  • R Cooper
  • Alok Johri

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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Bibliographic Info

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
Date of revision:
Handle: RePEc:mcm:deptwp:2000-02

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  12. Russell Cooper & Alok Johri, 1996. "Dynamic Complementarities: A Quantitative Analysis," NBER Working Papers 5691, National Bureau of Economic Research, Inc.
  13. Bahk, Byong-Hong & Gort, Michael, 1993. "Decomposing Learning by Doing in New Plants," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(4), pages 561-83, August.
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  18. Susumu Imai & Michael P. Keane, 2004. "Intertemporal Labor Supply and Human Capital Accumulation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 601-641, 05.
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