Can stimulating demand drive costs down? World War II as a natural experiment
Francois LafondSenior Research Associate Smith School for Enterprise and the Environment University of Oxford email@example.com
For many products, increases in cumulative production are associated with decreasing unit costs. However, a serious problem of reverse causality (lower prices leading to increasing demand) makes it difficult to use this relationship for policy. We study World War II, during which the demand for military products was largely exogenous, and the correlation between production, cumulative production and an exogenous time trend was limited. Our results indicate that decreases in cost can be attributed roughly equally to the growth of experience and to an exogenous time trend.
François is a Senior Research Officer and Lead Researcher at the Institute for New Economic Thinking and at the Mathematical Institute, University of Oxford, and deputy director of the Complexity Economics group. He is also an associate member of Nuffield college. He obtained his PhD in economics from UNU-MERIT at the University of Maastricht. His main areas of research are in the economics of innovation and productivity, environmental economics, networks and complex systems, applied econometrics and forecasting.
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