Rational Atrophy: The U.S. Steel Industry
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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- 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.