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Does regulation reduce productivity? Evidence from regulation of the U.S. beet-sugar manufacturing industry during the Sugar Acts, 1934-74

  • Benjamin Bridgman
  • Shi Qi
  • James A. Schmitz

We study the impact of regulation on productivity and welfare in the U.S. sugar manufacturing industry. While this U.S. industry has been protected from foreign competition for nearly 150 years, it was regulated only during the Sugar Act period, 1934-74. We show that regulation significantly reduced productivity, with these productivity losses leading to large welfare losses. Our initial results indicate that the welfare losses are many times larger than those typically studied ? those arising from higher prices. We also argue that the channels through which regulation led to large productivity and welfare declines in this industry were also present in many other regulated industries, like banking and trucking.

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Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 389.

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Date of creation: 2007
Date of revision:
Handle: RePEc:fip:fedmsr:389
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  1. Martin Pesendorfer & Philipp Schmidt-Dengler, 2003. "Identification and Estimation of Dynamic Games," NBER Working Papers 9726, National Bureau of Economic Research, Inc.
  2. James M. MacDonald & Linda Cavalluzzo, 1996. "Railroad deregulation: Pricing reforms, shipper responses, and the effects on labor," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 50(1), pages 80-91, October.
  3. Harold L. Cole & Lee E. Ohanian, 2004. "New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 779-816, August.
  4. Rose, Nancy L, 1987. "Labor Rent Sharing and Regulation: Evidence from the Trucking Industry," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1146-78, December.
  5. Diego Restuccia & Richard Rogerson, 2007. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," Working Papers tecipa-283, University of Toronto, Department of Economics.
  6. Austan Goolsbee & Amil Petrin, 2004. "The Consumer Gains from Direct Broadcast Satellites and the Competition with Cable TV," Econometrica, Econometric Society, vol. 72(2), pages 351-381, 03.
  7. George J. Stigler, 1971. "The Theory of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 3-21, Spring.
  8. John S. Ying & Theodore E. Keeler, 1991. "Pricing in a Deregulated Environment: The Motor Carrier Experience," RAND Journal of Economics, The RAND Corporation, vol. 22(2), pages 264-273, Summer.
  9. James M. MacDonald & Linda C. Cavalluzzo, 1996. "Railroad Deregulation: Pricing Reforms, Shipper Responses, and the Effects on Labor," ILR Review, Cornell University, ILR School, vol. 50(1), pages 80-91, October.
  10. Christopher R. Knittel, 2004. "Regulatory Restructuring and Incumbent Price Dynamics: The Case of U.S. Local Telephone Markets," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 614-625, May.
  11. Thomas J. Holmes & James A. Schmitz, 2001. "Competition at work : railroads vs. monopoly in the U.S. shipping industry," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-29.
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