Growth and Learning-By-Doing

Abstract

Learning by doing refers to improvements in productive efficiency arising from the generation of experience obtained by producing a good or service. The formal modelling of learning by doing was initiated in Arrow (1962) and was motivated by two main factors. The first motivating factor was empirical: several studies of wartime production found that input requirements decreased as a result of production experience. For example, Searle (1945) studied productivity changes in the Second World War shipbuilding programmes. During the Second World War, US production of ships increased dramatically, from 26 vessels in 1939 to 1,900 ships in 1943, an almost fiftyfold increase. Searle (1945) noticed that unit labour requirements decreased at a constant rate for a given percentage increase in output. On average, a doubling of output was associated with declines of 16 to 22 per cent in the number of man-hours required to build Liberty ships, Victory ships, tankers and standard cargo vessels. Alchian (1963) studied the relationship between the amount of direct labour required to produce an airframe and the number of airframes produced in the United States during the Second World War. He found that a doubling of production experience decreased labour input by approximately one-third. Other empirical studies of learning by doing include Rapping (1965), Irwin and Klenow (1994) and Thornton and Thompson (2001).

This chapter was originally published in The New Palgrave Dictionary of Economics, 2nd edition, 2008. Edited by Steven N. Durlauf and Lawrence E. Blume