IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Technology Upgrading with Learning Cost: A Solution for Two ‘Productivity Puzzles'

Listed author(s):
  • Sanghoon Ahn
Registered author(s):

    As it takes time and effort to learn how to fully utilise new technology and realise its maximum potential productivity gain, adoption of new technology tends to reduce productivity temporarily, even though the potential productivity gain in the long run outweighs this short run loss. This paper points to such “learning cost” in technology upgrading as a potential explanation of the following two “productivity puzzles” reported in the Information Technology (IT) literature and in the studies of East Asian economic growth. First, in the 1980s, US companies made enormous IT investments, but little productivity gain was observed. Second, Total Factor Productivity (TFP) growth of “Newly Industrialising Countries” (NICs) in East Asia was mediocre in spite of the impressive investment drive in those countries. A simple model of optimal intervals for technology upgrading with learning cost is developed. This model predicts that a company with higher frequency in technology upgrading will tend to have higher market value even with lower current profitability. An empirical study using unbalanced panel data of 1,031 US companies from 1986 to 1995 supports this prediction. Extending the scope from firm-level to industry-level, the paper estimates the magnitude of industry-wide learning-by-doing effects using annual data on 15 sub-industries in the Japanese machinery manufacturing sector from 1955 to 1990. The results show that industry-wide learning-by-doing was strong in low-tech industries where technological change was relatively slow, while it was insignificant in high-tech industries which experienced rapid technological evolution. It is also observed in the US and Japanese manufacturing industries that TFP growth tends to decrease with faster capital accumulation. This negative correlation is reproduced in simulations based on the extended model of learning cost. Apprendre à pleinement utiliser une nouvelle technologie et achever son gain potentiel de productivité demandent du temps et des efforts. Pour ces raisons, l’adoption d’une nouvelle technologie tend à baisser temporairement la productivité même si le gain de productivité à long terme dépasse cette perte à court terme. Cette étude présente l’existence des “coûts d’apprentissage” comme une explication potentielle à deux paradoxes de la productivité relevés dans les études concernant les technologies informatiques ainsi que celles portant sur la croissance économique en Asie de l’Est. Premier paradoxe: en dépit des investissements énormes par les firmes américaines pendant les années 80, il en a résulté peu de gain de productivité. Second paradoxe: la croissance de la productivité totale des facteurs (TFP) dans les nouveaux pays industrialisés (NPI) de l’Asie de l’Est a été médiocre malgré leur taux d’investissements exceptionnellement élevé. On modélise, dans cette étude, l’adoption de nouvelles technologies sous l’hypothèse des coûts d’apprentissage, et on obtient, dans ce cadre, son intervalle optimal. Le modèle prévoit que l’adoption technologique plus fréquente tend à augmenter la valeur de marché des firmes même si elle baisse la rentabilité courante. A l’aide des données de panel sur 1031 firmes américaines pour la période 1986-95, une étude économétrique nous permet de confirmer la prévision du modèle. Pour étendre l’analyse, on estime aussi l’amplitude des effets de l’apprentissage par pratique (learning by doing) au niveau des branches industrielles. Pour ce faire, on utilise les données annuelles (1955-1990) pour 15 branches japonaises fabriquant des machines. Les résultats montrent que l’apprentissage par pratique est plus important pour le gain de productivité dans les industries à basse technologie où les changements techniques sont relativement lents, alors qu’il occupe une place non significative dans les industries à haute technologie ayant connu une évolution technologique rapide. Par ailleurs, on trouve aussi que le taux de croissance de TFP tend à diminuer avec une accumulation de capital plus rapide dans les industries manufacturières américaines et japonaises. Cette corrélation négative est aussi reproduite par les simulations basées sur le modèle élargi des coûts d’apprentissage.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 220.

    in new window

    Date of creation: 30 Jul 1999
    Handle: RePEc:oec:ecoaaa:220-en
    Contact details of provider: Postal:
    2 rue Andre Pascal, 75775 Paris Cedex 16

    Phone: 33-(0)-1-45 24 82 00
    Fax: 33-(0)-1-45 24 85 00
    Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:oec:ecoaaa:220-en. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.