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Rational Atrophy: The U.S. Steel Industry

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  • Aaron Tornell

Abstract

During the 1970s and 1980s the steel industry in the United States enjoyed trade protection. However, higher prices were reflected in a higher wage premium relative to the rest of the manufacturing sector, and in a greater share of profits divested by integrated steel producers. Furthermore, available technology innovations were not adopted on a timely basis. This failure combined with trade protection, allowed new small firms (the minimills) to capture about 40% of the US steel market. In this paper, we present a model that rationalizes these facts.

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Bibliographic Info

Paper provided by Harvard - Institute of Economic Research in its series Harvard Institute of Economic Research Working Papers with number 1806.

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Date of creation: 1997
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Handle: RePEc:fth:harver:1806

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  1. Lenway, Stefanie & Morck, Randall & Yeung, Bernard, 1996. "Rent Seeking, Protectionism and Innovation in the American Steel Industry," Economic Journal, Royal Economic Society, vol. 106(435), pages 410-21, March.
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Cited by:
  1. Blonigen, Bruce A. & Wilson, Wesley W., 2010. "Foreign subsidization and excess capacity," Journal of International Economics, Elsevier, vol. 80(2), pages 200-211, March.
  2. Tansey, Michael & Raju, Sudhakar & Stellern, Michael, 2005. "Price controls, trade protectionism and political business cycles in the U.S. steel industry," Journal of Policy Modeling, Elsevier, vol. 27(9), pages 1097-1109, December.
  3. Aaron Tornell, 1999. "Privatizing the Privatized," NBER Working Papers 7206, National Bureau of Economic Research, Inc.
  4. Benjamin H. Liebman & Kara M. Reynolds, 2009. "Innovation Through Protection: Does Safeguard Protection Increase Investment in R and D?," Working Papers 2009-18, American University, Department of Economics.
  5. Schivardi, Fabiano & Schneider, Martin, 2005. "Strategic Experimentation and Disruptive Technological Change," CEPR Discussion Papers 4925, C.E.P.R. Discussion Papers.
  6. Rogers, Robert P., 2013. "Bankruptcy and steel plant shutdowns," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(2), pages 165-174.

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