Dynamic Efficiency with Learning by Doing

This article focuses on the measurement of economic efficiency of firms in an industry in a dynamic framework, where R&D investments and learning experience play critical roles. Dynamic aspects of cost and production efficiency and the impact of capital through learning by doing are developed here in semiparametric forms. The production and cost frontiers estimated here for the US computer industry over the period 1987-98 are robust in the sense that no specific functional form need be assumed. The empirical estimates measure the pattern of level and growth efficiency in the computer industry, which has undergone rapid changes in recent years.