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American Economic Journal: Applied Economics: Vol. 6 No. 1 (January 2014)

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Small Steps for Workers, a Giant Leap for Productivity

Article Citation

Hendel, Igal, and Yossi Spiegel. 2014. "Small Steps for Workers, a Giant Leap for Productivity." American Economic Journal: Applied Economics, 6(1): 73-90.

DOI: 10.1257/app.6.1.73

Abstract

We document the evolution of productivity in a steel mini mill with fixed capital, producing an unchanged product with Leontief technology working 24/7. Despite—almost—unchanged production conditions, output doubled within the sample period (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 well defined, even in batch-oriented manufacturing.

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Authors

Hendel, Igal (Northwestern U)
Spiegel, Yossi (Tel Aviv U and ZEW, Mannheim)

JEL Classifications

D24: Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
D83: Search; Learning; Information and Knowledge; Communication; Belief
G31: Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
J24: Human Capital; Skills; Occupational Choice; Labor Productivity
L23: Organization of Production
L61: Metals and Metal Products; Cement; Glass; Ceramics

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