The impact of knowledge accumulation and geographical spillovers on productivity and efficiency: The case of U. S. shipbuilding during WWII

Abstract

This paper examines the productivity and efficiency experience of World War II Liberty ship builders using two complementary paradigms which can be viewed as alternative specifications of the endogenous growth model introduced by Romer (1986) and the stochastic frontier production model introduced by Aigner, Lovell, and Schmidt (1977). We develop modifications in the endogenous growth model to allow for learning as well as spatial spillovers by relating productivity growth to cumulative productive experience (the ‘learning curve’) and to worker experience as it is transferred and utilized across different geographical regions. We also consider the relative impact of both proximal and distant simultaneous production on productivity growth. We then utilize a framework in which the efficiency component of productivity growth is explicitly considered using a stochastic frontier model wherein contributions to productivity growth introduced in the endogenous growth model are formally modeled as determinants of efficiency change. The statistical treatments can either be considered as special cases of or as motivated by the random coefficients models introduced by Swamy (1970, 1971, 1974). We thus offer a linkage between the neoclassical growth literature and the literature that explicitly recognizes that technical innovations as well as efficiency are the major drivers of productivity growth.