The Production Recipes Approach to Modeling Technological Innovation: An Application to Learning by Doing

Abstract

We do two things in this paper. First, we put forward some elements of a microeconomic theory of technological evolution. This involves adding nascent (essentially undiscovered) technologies to the existing technologies of neoclassical production theory, and, more importantly, expanding the notion of the production plan to include the recipe - the complete description of the underlying engineering process. Second, we use the recipes approach in constructing a simple microeconomic model of shop-floor learning by doing. We simulate the dynamics of the model and report the effects of changes in the basic parameters on the resulting engineering experience curves. For correctly chosen values of these parameters, the predictions of the model match the observed experience curves.

Keywords: engineering experience curves, learning by doing, learning curves, NK model, organizational learning, production recipes, technological evolution

JEL Classification: D20, D21, D24, D83, L23, O30