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The economic performance of cartels: evidence from the New Deal U.S. sugar manufacturing cartel, 1934-74

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Author Info

  • Benjamin Bridgman
  • Shi Qi
  • James A. Schmitz, Jr.

Abstract

We study the U.S. sugar manufacturing cartel that was created during the New Deal. This was a legal-cartel that lasted 40 years (1934-74). As a legal-cartel, the industry was assured widespread adherence to domestic and import sales quotas (given it had access to government enforcement powers). But it also meant accepting government-sponsored cartel-provisions. These provisions significantly distorted production at each factory and also where the industry was located. These distortions were reflected in, for example, a declining industry recovery rate, that is, the pounds of white sugar produced per ton of beets. It declined from about 310 pounds in 1934 to 240 pounds in 1974. The cartel provisions also distorted the location of industry. For example, it kept production in California and the Far West. Since the cartel ended in 1974, California's share of sugar production has dropped dramatically.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 437.

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Date of creation: 2009
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Handle: RePEc:fip:fedmsr:437

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Related research

Keywords: Cartels ; Productivity ; Competition;

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Cited by:
  1. Benjamin Bridgman & Michael Maio & James A. Schmitz, Jr., 2012. "What ever happened to the Puerto Rican sugar manufacturing industry?," Staff Report 477, Federal Reserve Bank of Minneapolis.
  2. Francisco Buera & Benjamin Moll & Yongseok Shin, 2013. "Well-Intended Policies," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 216-230, January.
  3. Gemmell, Norman & Kneller, Richard & McGowan, Danny & Sanz, Ismael & Sanz-Sanz, José F., 2013. "Corporate Taxation and Productivity Catch-Up: Evidence from European firms," Working Paper Series 2705, Victoria University of Wellington, Chair in Public Finance.
  4. Van Reenen, John, 2011. "Does competition raise productivity through improving management quality?," International Journal of Industrial Organization, Elsevier, vol. 29(3), pages 306-316, May.
  5. Chad Syverson, 2010. "What Determines Productivity?," NBER Working Papers 15712, National Bureau of Economic Research, Inc.
  6. Norman Gemmell & Richard Kneller & Danny McGowan & Ismael Sanz, . "Corporate Taxation and Productivity Catch-Up: Evidence from 11 European Countries," Discussion Papers 12/06, University of Nottingham, School of Economics.
  7. A. Lasagni & A. Nifo & G. Vecchione, 2012. "Firm productivity and institutional quality. Evidence from Italian industry," Economics Department Working Papers 2012-EP07, Department of Economics, Parma University (Italy).

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