Can Stimulating Demand Drive Costs Down? World War II as a Natural Experiment

François Lafond, Diana Greenwald and J. Farmer

The Journal of Economic History, 2022, vol. 82, issue 3, 727-764

Abstract: U.S. military production during World War II increased at an impressive rate and led to large declines in unit costs. However, the literature has focused on elucidating detailed mechanisms behind this relationship, using small datasets on specific products. Here we take a step back and, looking at an unprecedently large collection of data, we show that both exogenous technological progress and endogenous effects from increasing production experience were important, in roughly similar proportions. The demand for military products was largely exogenous, and the correlation between production, cumulative production, and time was weak, limiting issues of reverse causality and multicollinearity.

Date: 2022
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Working Paper: Can stimulating demand drive costs down? World War II as a natural experiment (2020)
Working Paper: Can stimulating demand drive costs down? World War II as a natural experiment (2020)
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