Social Learning and Production Heterogeneity

Abstract

Sustaining competitiveness over the long run can suggest that decision makers must acquire knowledge to support the selection of technology systems and an understanding of an implemented technology. Social learning is an important source of knowledge acquisition as the decision maker exchanges and discusses information with other decision makers via social communication. The empirical questions are (i) how does the decision maker choose learning partners, and (ii) how does the social learning behavior influence the firm’s production decision and technology over time? This study constructs an econometric model to reflect the connection between the decision maker’s social learning and the production behavior. The latent class stochastic frontier model (LCSFM) is used to estimate a model of heterogeneous learning using the International Crops Research Institute for the Semi-Arid Tropics (ICRISAT) India data. Since caste rank plays an important role in people’s social life in rural areas in India, the empirical results reveals the connection between social learning and production behavior by showing the importance of caste rank in production decisions.