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Rational Atrophy: The US Steel Industry

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  • Aaron Tornell

Abstract

During the seventies and eighties the US steel industry received trade protection. However, these rents were not used to improve competitiveness. Instead, they were reflected in higher wages and a greater share of profits invested in sectors not related to steel. Moreover, the steel industry failed to adopt technological innovations on a timely basis and was displaced by the minimills. We rationalize these puzzling outcomes using a dynamic game between workers and firms.

Suggested Citation

  • Aaron Tornell, 1997. "Rational Atrophy: The US Steel Industry," NBER Working Papers 6084, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:6084
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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 410-421, March.
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    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. Rogers, Robert P., 2013. "Bankruptcy and steel plant shutdowns," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(2), pages 165-174.
    6. Hasanbeigi, Ali & Arens, Marlene & Cardenas, Jose Carlos Rojas & Price, Lynn & Triolo, Ryan, 2016. "Comparison of carbon dioxide emissions intensity of steel production in China, Germany, Mexico, and the United States," Resources, Conservation & Recycling, Elsevier, vol. 113(C), pages 127-139.
    7. Benjamin H. Liebman & Kara M. Reynolds, 2015. "Trade Liberalisation and Capital Spending by US Manufacturers," The World Economy, Wiley Blackwell, vol. 38(11), pages 1763-1780, November.
    8. Fabiano Schivardi & Martin Schneider, 2008. "Strategic Experimentation and Disruptive Technological Change," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(2), pages 386-412, April.

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