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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.

Suggested Citation

  • Russell Cooper & John Haltiwanger, 1992. "Autos and the National Industrial Recovery Act: Evidence on Industry Complementarities," NBER Working Papers 4100, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4100
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    1. Huizinga, John & Mishkin, Frederic S., 1986. "Monetary policy regime shifts and the unusual behavior of real interest rates," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 24(1), pages 231-274, January.
    2. Howitt, Peter, 1985. "Transaction Costs in the Theory of Unemployment," American Economic Review, American Economic Association, vol. 75(1), pages 88-100, March.
    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 439-459, June.
    4. 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 503-534, June.
    5. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-856, July.
    6. Mankiw, N Gregory & Miron, Jeffrey A & Weil, David N, 1987. "The Adjustment of Expectations to a Change in Regime: A Study of the Founding of the Federal Reserve," American Economic Review, American Economic Association, vol. 77(3), pages 358-374, June.
    7. 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.
    8. Cooper, Russell W. & Haltiwanger, John Jr., 1992. "Macroeconomic implications of production bunching : Factor demand linkages," Journal of Monetary Economics, Elsevier, vol. 30(1), pages 107-127, October.
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    Cited by:

    1. 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.
    2. Cooper, Russell & Haltiwanger, John, 1993. "The Aggregate Implications of Machine Replacement: Theory and Evidence," American Economic Review, American Economic Association, vol. 83(3), pages 360-382, June.
    3. Federico Mini & Guido De Blasio, 2000. "Seasonality and Capacity; An Application to Italy," IMF Working Papers 00/80, International Monetary Fund.

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