Learning Curve and Industry Structure: Evidences from Iranian Manufacturing Industries

Abstract

The empirical studies have shown that cost advantages can occur due to economies of scale and economies of learning. However, a few studies have attempted to distinguish between these two effects on reducing costs. This paper is the first attempt on recognizing the impact of learning on reducing the cost with distinguishing the effect of economies of scale in Iran. Therefore, this study aims to shed light on cost benefits of industries based on learning and economies of scale in terms of their structures, as industries with various structures have different performances. Using industries at four-digit ISIC levels during 1997 to 2005, the findings show that learning rates is not uniform across industries and in fact learning rates are more than the effect of scale economies in only 11 among 31 industries. Moreover, the effect of learning in reducing cost in monopolistic industries is more than oligopolistic and competitive industries and similarly, learning is more in oligopolistic than competitive industries. From policy point of view, competitive industries should try to focus their efforts on achieving both dynamic and static dimensions of cost advantages to enhance their competitiveness in order to keep market shares.