Learning by doing, export subsidies, and industry growth: Japanese steel in the 1950s and 1960s

The paper examines the Japanese steel industry to evaluate the role of export subsidy policies. Export subsidies can be instrumental in increasing an industry's cost competitiveness in the presence of learning by doing, a characteristic of production in the steel industry. Using a dynamic estimation model, this paper identifies a significant learning rate of above 20% with little intra-industry knowledge spillover. Simulations made with the model indicate that the subsidy policy had an insignificant impact on industry growth. The paper finds that the export subsidy had a small effect in stimulating industry growth, because the estimated steel supply function was relatively inelastic.