Working Paper: CEPR ID: DP9289
Authors: Igal E. Hendel; Yossi Spiegel
Abstract: We document the evolution of productivity in a steel mini mill with fixed capital, producing an unchanged product with Leontief technology. Despite the fact that production conditions did not change dramatically, production doubles within the sample period (almost 12 years). We decompose the gains into: downtime reductions, more rounds of production per time, and more output per run. After attributing productivity gains to investment and an incentive plan, we are left with a large unexplained component. Learning by experimentation, or tweaking, seems to be behind the continual and gradual process of productivity growth. The findings suggest that capacity is not as well de?ned, even in batch-oriented manufacturing.
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JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Learning through experimentation or tweaking (C99) | 29% Unexplained productivity growth (O49) |
| Cumulative experience (C41) | Productivity gains (O49) |
| Managerial practices (M54) | Production outcomes (E23) |
| Incentive scheme (J33) | Increase in heats per day (Q54) |
| Increase in heats per day (Q54) | 144% Increase in production (E23) |
| Capital improvements (E22) | 197% Increase in production (D20) |