The semiconductor industry is often cited as a "strategic" industry in part because important learning-by-doing spillovers may justify special industrial policies. Documenting the precise nature of these spillovers is crucial for determining the advisability of such policies and is helpful for understanding the contribution of learning to endogenous growth. Yet existing empirical evidence on learning by doing in semiconductor production is scant and evidence on spillovers is nonexistent. Using quarterly, firm-level data on seven generations of dynamic random access memory (DRAM) semiconductors over 1974-92, we find that (a) learning rates average 20 percent, (b) firms learn three times more from an additional unit of their own cumulative production than from an additional unit of another firm's cumulative production, (c) learning spills over just as much between firms in different countries as between firms within a given country, (d) Japanese firms are indistinguishable from others in learning speed, and (e) intergenerational learning spillovers are weak, being marginally significant in only two of seven DRAM generations.

Abstract:Efforts to estimate the effects of international trade on a country's real income have been hampered by the failure to account for the endogeneity of trade. Frankel and Romer recently use a country's geographic attributes -notably its distance from potential trading partners -to construct an instrument to identify the effects of trade on income in 1985. Using data from the pre-World War I, the interwar, and the post-war periods, we find that the main result of Frankel and Romer is confirmed throughout the whole century: countries that trade more as a proportion of their GDP have higher incomes even after controlling for the endogeneity of trade. We also find that the OLS estimate of trade's effect on income is biased downwards in almost every sample year. However, this result is not robust to the inclusion of distance from equator (latitude).

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