Can stimulating demand drive costs down? World War II as a natural experiment

François Lafond, J. Farmer and Diana Greenwald

INET Oxford Working Papers from Institute for New Economic Thinking at the Oxford Martin School, University of Oxford

Abstract: For many products, increases in cumulative production are associated with decreasing unit costs. However, a serious problem of reverse causality (lower prices leading to increasing demand) makes it difficult to use this relationship for policy. We study World War II, during which the demand for military products was largely exogenous, and the correlation between production, cumulative production and an exogenous time trend was limited. Our results indicate that decreases in cost can be attributed roughly equally to the growth of experience and to an exogenous time trend.

Keywords: innovation policy; learning curve; natural experiment; World War II (search for similar items in EconPapers)
Pages: 62 pages
Date: 2020-06
New Economics Papers: this item is included in nep-his and nep-isf
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Citations: View citations in EconPapers (4)

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Journal Article: Can Stimulating Demand Drive Costs Down? World War II as a Natural Experiment (2022)
Working Paper: Can stimulating demand drive costs down? World War II as a natural experiment (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:amz:wpaper:2020-02

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