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Cementing the Case for Collusion under the National Recovery Administration

In: The Microeconomics of New Deal Policy

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Listed:
  • Mark Chicu
  • Chris Vickers
  • Nicolas L. Ziebarth

Abstract

Macroeconomists have long debated the aggregate effects of anti-competitive provisions under the “Codes of Fair Conduct” promulgated by the National Industrial Recovery Act (NIRA). Despite the emphasis on these provisions, there is only limited evidence documenting any actual effects at the micro-level. We use a combination of narrative evidence and a novel plant-level dataset from 1929, 1931, 1933, and 1935 to study the effects of the NIRA in the cement industry. We develop a test for collusion specific to this particular industry. We find strong evidence that before the NIRA, the costs of a plant's nearest neighbor had a positive effect on a plant's own price, suggesting competition. After the NIRA, this effect is completely eliminated, with no correlation between a plant's own price and its neighbor's cost.
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Suggested Citation

  • Mark Chicu & Chris Vickers & Nicolas L. Ziebarth, 2012. "Cementing the Case for Collusion under the National Recovery Administration," NBER Chapters, in: The Microeconomics of New Deal Policy, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:13199
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    References listed on IDEAS

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    1. Raff, Daniel M G, 1998. "Representative Firm Analysis and the Character of Competition: Glimpses from the Great Depression," American Economic Review, American Economic Association, vol. 88(2), pages 57-61, May.
    2. Matthew B. Krepps, 1997. "Another Look At The Impact Of The National Industrial Recovery Act On Cartel Formation And Maintenance Costs," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 151-154, February.
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    6. Matthew J Osborne & Nathan H. Miller, 2011. "Competition among Spatially Differentiated Firms: An Estimator with an Application to Cement," BEA Working Papers 0072, Bureau of Economic Analysis.
    7. Fishback, Price V. & Horrace, William C. & Kantor, Shawn, 2005. "Did New Deal Grant Programs Stimulate Local Economies? A Study of Federal Grants and Retail Sales During the Great Depression," The Journal of Economic History, Cambridge University Press, vol. 65(1), pages 36-71, March.
    8. Francine D. Blau & Lawrence M. Kahn & Joan Y. Moriarty & Andre Portela Souza, 2003. "The Role of the Family in Immigrants' Labor-Market Activity: An Evaluation of Alternative Explanations: Comment," American Economic Review, American Economic Association, vol. 93(1), pages 429-447, March.
    9. Alexander, Barbara J., 1997. "Failed Cooperation in Heterogeneous Industries Under the National Recovery Administration," The Journal of Economic History, Cambridge University Press, vol. 57(2), pages 322-344, June.
    10. Alexander, Barbara, 1994. "The Impact of the National Industrial Recovery Act on Cartel Formation and Maintenance Costs," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 245-254, May.
    11. Jason E. Taylor, 2011. "Work‐sharing During the Great Depression: Did the ‘President's Reemployment Agreement’ Promote Reemployment?," Economica, London School of Economics and Political Science, vol. 78(309), pages 133-158, January.
    12. Alexander, Barbara & Libecap, Gary D., 2000. "The Effect of Cost Heterogeneity in the Success and Failure of the New Deal's Agricultural and Industrial Programs," Explorations in Economic History, Elsevier, vol. 37(4), pages 370-400, October.
    13. Jason E. Taylor, 2002. "The Output Effects of Government Sponsored Cartels During the New Deal," Journal of Industrial Economics, Wiley Blackwell, vol. 50(1), pages 1-10, March.
    14. Bresnahan, Timothy F. & Raff, Daniel M. G., 1991. "Intra-Industry Heterogeneity and the Great Depression: The American Motor Vehicles Industry, 1929–1935," The Journal of Economic History, Cambridge University Press, vol. 51(2), pages 317-331, June.
    15. Rose, Jonathan D., 2010. "Hoover's Truce: Wage Rigidity in the Onset of the Great Depression," The Journal of Economic History, Cambridge University Press, vol. 70(4), pages 843-870, December.
    16. Jason E. Taylor, 2007. "Cartel Code Attributes and Cartel Performance: An Industry-Level Analysis of the National Industrial Recovery Act," Journal of Law and Economics, University of Chicago Press, vol. 50(3), pages 597-624.
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    Cited by:

    1. Price Fishback, 2017. "How Successful Was the New Deal? The Microeconomic Impact of New Deal Spending and Lending Policies in the 1930s," Journal of Economic Literature, American Economic Association, vol. 55(4), pages 1435-1485, December.
    2. Alexandre Mas, 2016. "Does Disclosure affect CEO Pay Setting? Evidence from the Passage of the 1934 Securities and Exchange Act," Working Papers 2016-5, Princeton University. Economics Department..
    3. Miguel Morin, 2015. "The Labor Market Consequences of Electricity Adoption: Concrete Evidence from the Great Depression," Cambridge Working Papers in Economics 1554, Faculty of Economics, University of Cambridge.
    4. Holt, Andrew Chase, 2024. "Monopsony power in the United States: Evidence from the great depression," Explorations in Economic History, Elsevier, vol. 92(C).
    5. Nikolaus Fink & Philipp Schmidt-Dengler & Konrad Stahl & Christine Zulehner, 2017. "Registered cartels in Austria: an overview," European Journal of Law and Economics, Springer, vol. 44(3), pages 385-422, December.
    6. Chicu, Mark & Ziebarth, Nicolas L., 2013. "Multi-market contact and competition: evidence from the Depression-era portland cement industry," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 603-611.
    7. Hong, Hyung Ju, 2022. "Effects of Competition Policy on Macroeconomic Outcomes," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 37(2), pages 337-376.
    8. Price Fishback & Chris Vickers & Nicolas L. Ziebarth, 2024. "Labor Market Effects of Workweek Restrictions: Evidence from the Great Depression," American Economic Journal: Macroeconomics, American Economic Association, vol. 16(4), pages 77-113, October.
    9. Jaworski, Taylor, 2020. "Specification and structure in economic history," Explorations in Economic History, Elsevier, vol. 77(C).
    10. Nicolas L. Ziebarth, 2013. "Identifying the Effects of Bank Failures from a Natural Experiment in Mississippi during the Great Depression," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(1), pages 81-101, January.
    11. Taylor, Jason E. & Neumann, Todd C., 2016. "Recovery Spring, Faltering Fall: March to November 1933," Explorations in Economic History, Elsevier, vol. 61(C), pages 54-67.
    12. Breitenlechner, Max & Mathy, Gabriel P. & Scharler, Johann, 2021. "Decomposing the U.S. Great Depression: How important were loan supply shocks?," Explorations in Economic History, Elsevier, vol. 79(C).

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