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Learning and Forgetting: The Dynamics of Aircraft Production

Learning and Forgetting: The Dynamics of Aircraft Production By C. LANIER BENKARD* Many past empirical studies have documented “learning-by-doing,” the hypothesis that unit cost decreases with cumulative production, in military aircraft production [T. P. Wright (1936), Harold Asher (1956), Armen Alchian (1963), Thomas R. Gulledge Norman Keith Womer (1986)]. Utilizing newly available production data for the Lockheed L-1011 TriStar, this paper studies commercial aircraft production, with an emphasis on the dynamics of production technology. Because commercial production is subject to many uncertainties not present in military production, the data presented here allow consideration of a richer set of hypotheses than was previously possible. In addition to learning, support is found for organizational forgetting (the hypothesis that the firm’s production experience depreciates over time), incomplete spillovers of production expertise from one generation of an aircraft to the next. This research is directed toward commercial aircraft for several reasons. The aircraft industry has many unique features—massive entry costs, dynamically increasing returns, imperfect competition, the fact that many countries consider it “strategic”—that make it important from a policy perspective, the industry has frequently been the target of industrial policy, most notably in Europe. Dynamically increasing returns associated with learning make the industry a rare case in which infant industry http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Review American Economic Association

Learning and Forgetting: The Dynamics of Aircraft Production

American Economic Review , Volume 90 (4) – Sep 1, 2000

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References (34)

Publisher
American Economic Association
Copyright
Copyright © 2000 by the American Economic Association
Subject
Shorter Papers
ISSN
0002-8282
DOI
10.1257/aer.90.4.1034
Publisher site
See Article on Publisher Site

Abstract

By C. LANIER BENKARD* Many past empirical studies have documented “learning-by-doing,” the hypothesis that unit cost decreases with cumulative production, in military aircraft production [T. P. Wright (1936), Harold Asher (1956), Armen Alchian (1963), Thomas R. Gulledge Norman Keith Womer (1986)]. Utilizing newly available production data for the Lockheed L-1011 TriStar, this paper studies commercial aircraft production, with an emphasis on the dynamics of production technology. Because commercial production is subject to many uncertainties not present in military production, the data presented here allow consideration of a richer set of hypotheses than was previously possible. In addition to learning, support is found for organizational forgetting (the hypothesis that the firm’s production experience depreciates over time), incomplete spillovers of production expertise from one generation of an aircraft to the next. This research is directed toward commercial aircraft for several reasons. The aircraft industry has many unique features—massive entry costs, dynamically increasing returns, imperfect competition, the fact that many countries consider it “strategic”—that make it important from a policy perspective, the industry has frequently been the target of industrial policy, most notably in Europe. Dynamically increasing returns associated with learning make the industry a rare case in which infant industry

Journal

American Economic ReviewAmerican Economic Association

Published: Sep 1, 2000

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