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Autos and the National Industrial Recovery Act: Evidence on Industry Complementarities

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  • Russell Cooper
  • John Haltiwanger

Abstract

This paper investigates the motivations for, and implications of, the Automobile Industry code under the National Industrial Recovery Act. The amended code contained a provision calling for automobile producers to alter the timing of new model introductions and the annual automobile show as a means of regularizing employment in the industry. After documenting key features of the automobile industry during the 1920s and 1930s and outlining the provisions of the automobile code, we analyze two models of the annual automobile cycle to explain the observations. In one model, the NIRA code simply codified a change in industry behavior that would have taken place anyway due to a change in fundamentals in the economy during the early 1930s. The competing model introduces a coordination problem into the determination of the equilibrium timing of new model introductions. Our analysis of this period provides evidence against the hypothesis that changes in fundamentals led to the dramatic changes in the seasonal pattern of production and sales starting in 1935. Instead, it appears that the National Industrial Recovery Act succeeded in coordinating activity on an alternative equilibrium.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4100.

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Date of creation: Jun 1992
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Publication status: published as Quarterly Journal of Economics, Vol. 108, No. 4, 1993, pp. 1043-1071
Handle: RePEc:nbr:nberwo:4100

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  1. Russell Cooper & John Haltiwanger, 1990. "Macroeconomic Implications of Production Bunching: Factor Demand Linkages," Papers 0001, Boston University - Industry Studies Programme.
  2. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-56, July.
  3. Bernanke, Ben S & Parkinson, Martin L, 1991. "Procyclical Labor Productivity and Competing Theories of the Business Cycle: Some Evidence from Interwar U.S. Manufacturing Industries," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 439-59, June.
  4. Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
  5. N. Gregory Mankiw & Jeffrey A. Miron & David N. Weil, 1987. "The Adjustment of Expectations to a Change in Regime: A Study of the Founding of the Federal Reserve," NBER Working Papers 2124, National Bureau of Economic Research, Inc.
  6. Barsky, Robert B & Miron, Jeffrey A, 1989. "The Seasonal Cycle and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 503-34, June.
  7. John Huizinga & Frederic S. Mishkin, 1985. "Monetary Policy Regime Shifts and the Unusual Behavior of Real Interest Rates," NBER Working Papers 1678, National Bureau of Economic Research, Inc.
  8. Howitt, Peter, 1985. "Transaction Costs in the Theory of Unemployment," American Economic Review, American Economic Association, vol. 75(1), pages 88-100, March.
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Cited by:
  1. Cooper, Russell & Haltiwanger, John, 1993. "The Aggregate Implications of Machine Replacement: Theory and Evidence," American Economic Review, American Economic Association, vol. 83(3), pages 360-82, June.
  2. Guido de Blasio & Federico Mini, 2001. "Seasonality and Capacity: an Application to Italy," Temi di discussione (Economic working papers) 403, Bank of Italy, Economic Research and International Relations Area.
  3. Russell W. Cooper, 2002. "Estimation and Identification of Structural Parameters in the Presence of Multiple Equilibria," NBER Working Papers 8941, National Bureau of Economic Research, Inc.

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