On the Existence of Learning Effects in Swedish Kraft Paper Mills

Lundmark, R. (2003). On the Existence of Learning Effects in Swedish Kraft Paper Mills. IIASA Interim Report. IIASA, Laxenburg, Austria: IR-03-063

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Abstract

This paper presents an alternative approach in estimating the effect learning has on the cost structure facing individual firms. The suggested method is applied to the Swedish kraft paper industry and relies on the comprehensive dataset for eight individual integrated kraft paper mills. The analysis is conducted through two steps. "First", using a flexible cost function, utilizing mill-specific dummy variables, a cost reduction index can be estimated devoid of scale and price effects that if not dealt with can produce spurious results when estimating learning effects. The second "second" step is to regress the estimated cost reduction index on the traditional determinants that are thought to influence the learning process. The results suggest that the Swedish kraft paper industry has relatively little to gain in terms of cost reduction through a further learning process. However, the method performed well, producing intuitive and statistically significant estimates indicating its usefulness in further analyses.

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