Ilzetzki, Ethan (2024) Learning by necessity: government demand, capacity constraints, and productivity growth. American Economic Review, 114 (8). 2436 – 2471. ISSN 0002-8282
![]() |
Text (Learning by necessity)
- Accepted Version
Download (815kB) |
Abstract
This paper studies how firms adapt to demand shocks when facing capacity constraints. I show that increases in government purchases raise total factor productivity in quantity units at the production-line level. Productivity gains are concentrated in plants facing tighter capacity constraints, a phenomenon I call “learning by necessity”. Evidence is based on newly digitized archival data on USWorldWar II aircraft production. Shifts in demand across aircraft with different strategic roles provide an instrument for aircraft demand. I show that plants adapted to surging demand by improving production methods, outsourcing, and combating absenteeism, primarily when facing tighter capacity constraints.
Actions (login required)
![]() |
View Item |