Learning and Forgetting in the PV Cell Industry

A dynamic structural-empirical model is developed in order to estimate the size of the learning spillover within the world photovoltaic (PV) cell industry. We extend the approach of Benkard (American Economic Review 2000) on industry level, so that the spillover appears across firms within the industry. Firms produce a homogeneous good and make capital investment decisions for the next period. The size of the spillover is estimated to be 8.83%, indicating that learning is a private good within the PV industry. Industrial forgetting is not found to be a strong effect. A simple policy analysis shows that production and productivity both decrease as the size of the spillover is increased.