Learning by Doing: Evidence from an Automobile Assembly Plant
Each ten-fold increase in cumulative production halves average defect rates.
Economists believe that "learning-by-doing" helps to shape and drive productivity growth, increasing the returns to human capital. Yet, to date, it has been difficult to understand the mechanisms behind that sort of "on the job training" because of a lack of data.
In Toward an Understanding of Learning by Doing: Evidence from an Automobile Assembly Plant (NBER Working Paper No. 18017), co-authors Steven Levitt, John List, and Chad Syverson analyze data from a major automobile manufacturer's assembly plant, which produces nearly 200,000 cars annually with several hundred different operations occurring along its assembly line. They find that product quality improves over time, with high defect rates at the beginning of the production process that decline quickly as plant operations begin. The overall relationship between defect rates and cumulative production implies that each ten-fold increase in cumulative production halves average defect rates.
The authors also find that the learning process is not restarted when the plant's second shift begins operations. Instead, the shift actually begins at average defect rates that are below the first shift's rates. This suggests that not all learning-by-doing knowledge gains are embodied in the plant's workers. In fact, the researchers find that worker absenteeism affects defect rates, but not very much, which highlights instead the importance of the plant's physical and organizational capital as depositories of learning-by-doing know-how.
Furthermore, the authors find that the most defect-prone of the hundreds of processes involved in assembling a car have defect rates that are highly correlated across shifts within the same time period, even though different workers are completing these tasks. Together, these results indicate that much of what is learned in the plant becomes embodied very quickly in the physical or broader organizational capital of the plant, rather than remaining only with workers.