Hostname: page-component-586b7cd67f-gb8f7 Total loading time: 0 Render date: 2024-11-24T23:29:40.345Z Has data issue: false hasContentIssue false
  • English
  • Français

Did the National Industrial Recovery Act Foster Collusion? Evidence from the Macaroni Industry

Published online by Cambridge University Press:  29 August 2014

Chris Vickers  and
Nicolas L. Ziebarth
Chris Vickers
Affiliation:
Assistant Professor, Department of Economics, Auburn University, Auburn, AL 36830. E-mail: [email protected].
Nicolas L. Ziebarth
Affiliation:
Assistant Professor, Department of Economics, University of Iowa and NBER, Iowa City, IA 52245. E-mail: [email protected].
Get access Rights & Permissions [Opens in a new window]

Abstract

We use plant-level data from the Census of Manufactures to study collusion in the United States macaroni industry during the Great Depression. The National Industrial Recovery Act was passed in 1933 to promote recovery through industry coordination of economic activity. While there is no change in the price-cost margin after the law is passed, a variety of markers of anti-competitive conduct suggest that collusion indeed increased. Prices became less responsive to changes in cost, the dispersion of prices decreased, and the persistence in prices increased.

Type
Articles
Information
The Journal of Economic History , Volume 74 , Issue 3 , September 2014 , pp. 831 - 862
Copyright
Copyright © The Economic History Association 2014 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

We thank Joseph Ferrie and Joel Mokyr for helpful comments and funding as well as William Creech at the National Archives. We have also received useful feedback from two anonymous reviewers, Mark Chicu, Rob Porter, and Jason Taylor as well as participants at the EBHS conference in Columbus and the Northwestern Economic History seminar. Mary Hansen helped organize data collection at the National Archives. Doug Bojack, Joanna Gregson, and Dan Thomas helped photograph the original schedules. The Center for the Study of Industrial Organization at Northwestern also provided funding. Ziebarth also thanks the Robert Eisner Memorial and Sokoloff Fellowships for support. All errors are our own.

References

REFERENCES

Abrantes-Metz, Rosa M. Froeb, Luke, Geweke, John, and Taylor, Christopher T. “A Variance Screen for Collusion.” International Journal of Industrial Organization (24), no. 3 (2006): 467–86.Google Scholar
Alexander, Barbara. “The Impact of the National Industrial Recovery Act on Cartel Formation and Maintenance Costs.” Review of Economics and Statistics 76 (1994): 245–54.Google Scholar
Alexander, Barbara. “Failed Cooperation in Heterogeneous Industries Under the National Recovery Administration.” The Journal of Economic History (57), no. 2 (1997): 322–44.CrossRefGoogle Scholar
Alexander, Barbara, and Libecap, Gary. “The Effect of Cost Heterogeneity in the Success and Failure in the New Deal's Agricultural and Industrial Programs.” Explorations in Economic History (37), no. 4 (2000): 370–400.CrossRefGoogle Scholar
Ashenfelter, Orley. “Estimating the Effects of Training Programs on Earnings.” The Review of Economics and Statistics (60), no. 4 (1978): 47–57.Google Scholar
Athey, Susan, and Bagwell, Kyle. “Collusion with Persistent Cost Shocks.” Econometrica (76), no. 3 (2008): 493–540.Google Scholar
Bittlingmayer, George. “Output and Stock Prices When Antitrust is Suspended: The Effects of the NIRA.” In The Causes and Consequences of Antitrust: The Public Choice Perspective, edited by McChesney, Fred and Shughar, William, 287–318. Chicago: University of Chicago Press, 1995.Google Scholar
Yuliya, Bolotova, Connor, John, and Miller, Douglas. “The Impact of Collusion on Price Behavior: Empirical Results from Two Recent Cases.” International Journal of Industrial Organization (26), no. 6 (2008): 1290–1307.Google Scholar
Brand, Donald. Corporatism and the Rule of Law: A Study of the National Recovery Administration. Ithaca, NY: Cornell University Press, 1988.Google Scholar
Bresnahan, Timothy, and Raff, Daniel M. “Intra-Industry Heterogeneity and the Great Depression: The American Motor Vehicles Industry, 1929–1935.” The Journal of Economic History (51), no. 2 (1991): 317–31.CrossRefGoogle Scholar
Bureau of Labor Statistics. “Wholesale Prices of Commodities.” Various issues, 1930–1941.Google Scholar
Carlton, Dennis W. “The Theory and the Facts of How Markets Clear: Is Industrial Organization Valuable for Understanding Macroeconomics.” In Handbook of Industrial Organization: Volume 1, edited by Schmalensee, Richard and Willig, Robert, 909–46. Amsterdam: North-Holland. 1989.Google Scholar
Chicu, Mark, Vickers, Chris, and Ziebarth, Nicolas L. “Cementing the Case for Collusion Under the National Recovery Administration.” Explorations in Economic History (50), no. 4 (2013): 487–507.Google Scholar
Cole, Harold L. and Lee, Ohanian. “New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis.” Journal of Political Economy (112), no. 4 (2004): 779–816.Google Scholar
Connor, John. “Collusion and Price Dispersion. Applied Economic Letters (12), no. 6 (2005): 225–28.CrossRefGoogle Scholar
Eggertsson, Gaudi. “Was the New Deal Contractionary?” American Economic Review (104), no. 1 (2012): 524–55.CrossRefGoogle Scholar
Floetotto, Max, and Jaimovich, Nir. “Firm Dynamics, Markup Variation, and the Business Cycle.” Journal of Monetary Economics (55), no. 7 (2008): 1238–52.Google Scholar
Foster, Lucia, Haltiwanger, John, and Syverson, Chad. “Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?” American Economic Review (98), no. 1 (2008): 394–425.Google Scholar
Freyer, Tony A. Antitrust and Global Capitalism, 1930–2004. Cambridge: Cambridge University Press, 2006.CrossRefGoogle Scholar
Hanazono, Makato, and Yang, Huanxing. “Collusion, Fluctuating Demand, and Price Rigidity.” Unpublished Manuscript, Ohio State University, 2006.Google Scholar
Harrington, Joseph. “Detecting Cartels.” In Handbook of Antitrust Economics, edited by Buccirossi, Paolo, 213–58. Cambridge, MA: MIT Press, 2008.Google Scholar
Harrington, Joseph, and Chen, Joe. “Cartel Pricing Dynamics with Cost Variability and Endogenous Buyer Detection.” Unpublished Manuscript, Johns Hopkins University, 2005.Google Scholar
Harrington, Joseph, and Haltiwanger, John. “The Impact of Cyclical Demand Movements on Collusive Behavior.” RAND Journal of Economics 22, no. 1 (Spring 1991): 89–106.Google Scholar
Hawley, Ellis. The New Deal and the Problem of Monopoly. Princeton, NJ: Princeton University Press, 1974.Google Scholar
Kitch, Edmund W. “The Fire of Truth: A Remembrance of Law and Economics at Chicago, 1932–1970.” Journal of Law and Economics 26, no. 1 (April 1983): 163–234.Google Scholar
Klein, Peter, and Taylor, Jason. “Anatomy of a Cartel: The National Industrial Recovery Act of 1933 and the Compliance Crisis of 1934.” Research in Economic History 26 (2008): 235–71.Google Scholar
Krepps, Matthew. “Another Look at the Impact of the National Industrial Recovery Act on Cartel Formation and Maintenance Costs.” Review of Economics and Statistics (79), no. 1 (1997): 151–54.Google Scholar
Martins, Joaquim Oliveira, Stefano, Scarpetta, and Dirk, Pilat. “Mark-Up Pricing, Market Structure, and the Business Cycle.” OECD Economic Studies 27 (1996): 71–106.Google Scholar
Mills, Frederick. The Behavior of Prices. New York: NBER, 1927.Google Scholar
Nevo, Aviv. “Measuring Market Power in the Ready-to-Eat Cereal Industry.” Econometrica (69), no. 2 (2001): 307–42.Google Scholar
Pennock, Pamela. “The National Recovery Administration and the Rubber Tire Industry, 1933–1935.” Business History Review (71), no. 4 (1997): 543–68.CrossRefGoogle Scholar
Porter, Robert. “A Study of Cartel Stability: The Joint Executive Committee, 1880–1886.” The Bell Journal of Economics 14, no. 2 (Autumn 1983): 301–14.Google Scholar
Romer, Christina. “Why Did Prices Rise in the 1930s?” The Journal of Economic History (59), no. 1 (1999): 167–99.Google Scholar
Roos, Charles Frederick. NRA Economic Planning. New Haven, CT: Cowles Foundation, 1935.Google Scholar
Julio, Rotemberg, and Saloner, Garth. “A Supergame-Theoretic Model of Price Wars During Booms.” American Economic Review (76), no. 3 (1986): 390–407.Google Scholar
Schlesinger, Arthur M. The Crisis of the Old Order: 1919–1933, The Age of Roosevelt, Volume I. New York: Mariner Books, 2003.Google Scholar
Peter, Scott, and Ziebarth, Nicolas L.. “The Determinants of Plant Survival in the U.S. Radio Equipment Industry During the Great Depression.” Unpublished Manuscript, University of Iowa, 2013.Google Scholar
Tappata, Mariano. “Rockets and Feathers: Understanding Asymmetric Pricing.” RAND Journal of Economics 40, no. 4 (Winter 2009): 673–87.Google Scholar
Taylor, Jason. “The Output Effects of Government-Sponsored Cartels During the New Deal.” Journal of Industrial Economics (50), no. 1 (2002): 1–10.Google Scholar
Taylor, Jason. “Cartel Code Attributes and Cartel Performance: An Industry-Level Analysis of the National Recovery Act.” Journal of Law and Economics (50), no. 3 (2007): 597–624.Google Scholar
Ziebarth, Nicolas L. “The Great Depression through the Eyes of the Census of Manufactures.” Unpublished Manscript, University of Iowa, 2013.Google Scholar