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Learning Curves and the Cyclical Behavior of Manufacturing Industries

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  • Peter Klenow

    (University of Chicago)

Abstract

Building on evidence that (a) productivity growth from learning by doing diminishes as experience accumulates with a technology and (b) learning by doing is largely specific to each production technology, this paper models a firm's decision of when to update its technology. The model implies that technology updates endogenously bring large drops in productivity. The model also implies that technology updates are more likely in a boom than in a recession since a high rate of production enables the firm to learn more quickly about the new technology. The forces in this model may help explain some features of plant and industry level data, such as the procyclicality of investment (including plant investment spikes) and the modest correlation between labor input and productivity. (Copyright: Elsevier)

Suggested Citation

  • Peter Klenow, 1998. "Learning Curves and the Cyclical Behavior of Manufacturing Industries," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 531-550, April.
  • Handle: RePEc:red:issued:v:1:y:1998:i:2:p:531-550
    DOI: 10.1006/redy.1998.0014
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    References listed on IDEAS

    as
    1. Cooper, Russell & Haltiwanger, John, 1993. "The Aggregate Implications of Machine Replacement: Theory and Evidence," American Economic Review, American Economic Association, vol. 83(3), pages 360-382, June.
    2. Parente Stephen L., 1994. "Technology Adoption, Learning-by-Doing, and Economic Growth," Journal of Economic Theory, Elsevier, vol. 63(2), pages 346-369, August.
    3. Phoebus J Dhrymes, 1991. "The Structure Of Production Technology Productivity And Aggregation Effects," Working Papers 91-5, Center for Economic Studies, U.S. Census Bureau.
    4. Mark Bils & Peter J. Klenow, 1998. "Using Consumer Theory to Test Competing Business Cycle Models," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 233-261, April.
    5. Mark E. Doms & Timothy Dunne, 1998. "Capital Adjustment Patterns in Manufacturing Plants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 409-429, April.
    6. Richard Zeckhauser, 1968. "Optimality in a World of Progress and Learning," Review of Economic Studies, Oxford University Press, vol. 35(3), pages 363-365.
    7. Argote, L. & Epple, D., 1990. "Learning Curves In Manufacturing," GSIA Working Papers 89-90-02, Carnegie Mellon University, Tepper School of Business.
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    More about this item

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing

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