WHERE DOES TECHNOLOGICAL progress come from and what determines
its rate of advance? In answering these questions, it is useful to decompose
technological progress into the invention of new techniques and
products and the improvement of existing ones.
Roughly speaking, the economist sees invention as the result of
research and development, and improvement as the result of experience-
learning by doing. Because productivity growth on any single
process is likely to be bounded, invention is the origin of long-run
productivity growth. But the "level" effects of improvement on
productivity have, in some activities, been found to be huge-on the
order of several hundreds of percentage points. Thus understanding
how the process of improvement works will help us better account
for growth. This paper concerns itself with a simple model of one of
the forces involved in improvement, namely, the improvement in
productive efficiency that occurs as a joint product with output, or
learning by doing.