Depreciation and transfer of knowledge: an empirical exploration of a shipbuilding process

It is well known from the psychological literature that knowledge acquisition (learning) and knowledge depreciation (unlearning) are governed by quite different rules. We propose a new learning curve model that measures acquisition of knowledge and depreciation in a single framework but governed by two different rules. The model considers that knowledge is acquired both by doing and from the experience of others. It also assumes that knowledge depreciates, if it does, continuously over time. We empirically demonstrate the applicability of our model using a dataset based on the construction of homogeneous ships in sixteen different shipways of a shipyard. It is observed that learning by doing (or direct learning) is the major source of productivity growth. Learning from others (or indirect learning) is also found to be sizable. The potential contribution to productivity of indirect learning is about 40% of the contribution of direct learning. It is also observed that knowledge indeed depreciates and it does so rapidly. Only about three quarters of knowledge available at the beginning of a month would remain by the end of the month due to forgetting. Therefore, if depreciation of knowledge or indirect learning (the transfer of knowledge) in a learning curve analysis is ignored, estimation of production rates and costs would be seriously biased.