Skip to main content
×
×
Home

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

  • Chris Vickers (a1) and Nicolas L. Ziebarth (a2)
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.

Copyright
Footnotes
Hide All

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.

Footnotes
References
Hide All
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.
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.
Alexander, Barbara. “Failed Cooperation in Heterogeneous Industries Under the National Recovery Administration.The Journal of Economic History (57), no. 2 (1997): 322–44.
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): 370400.
Ashenfelter, Orley. “Estimating the Effects of Training Programs on Earnings.The Review of Economics and Statistics (60), no. 4 (1978): 4757.
Athey, Susan, and Bagwell, Kyle. “Collusion with Persistent Cost Shocks.Econometrica (76), no. 3 (2008): 493540.
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, 287318. Chicago: University of Chicago Press, 1995.
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): 12901307.
Brand, Donald. Corporatism and the Rule of Law: A Study of the National Recovery Administration. Ithaca, NY: Cornell University Press, 1988.
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.
Bureau of Labor Statistics. “Wholesale Prices of Commodities.Various issues, 19301941.
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.
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): 487507.
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): 779816.
Connor, John. “Collusion and Price Dispersion. Applied Economic Letters (12), no. 6 (2005): 225–28.
Eggertsson, Gaudi. “Was the New Deal Contractionary?American Economic Review (104), no. 1 (2012): 524–55.
Floetotto, Max, and Jaimovich, Nir.Firm Dynamics, Markup Variation, and the Business Cycle.Journal of Monetary Economics (55), no. 7 (2008): 1238–52.
Foster, Lucia, Haltiwanger, John, and Syverson, Chad.Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?American Economic Review (98), no. 1 (2008): 394425.
Freyer, Tony A. Antitrust and Global Capitalism, 1930–2004. Cambridge: Cambridge University Press, 2006.
Hanazono, Makato, and Yang, Huanxing.Collusion, Fluctuating Demand, and Price Rigidity.Unpublished Manuscript, Ohio State University, 2006.
Harrington, Joseph. “Detecting Cartels.” In Handbook of Antitrust Economics, edited by Buccirossi, Paolo, 213–58. Cambridge, MA: MIT Press, 2008.
Harrington, Joseph, and Chen, Joe. “Cartel Pricing Dynamics with Cost Variability and Endogenous Buyer Detection.Unpublished Manuscript, Johns Hopkins University, 2005.
Harrington, Joseph, and Haltiwanger, John. “The Impact of Cyclical Demand Movements on Collusive Behavior.RAND Journal of Economics 22, no. 1 (Spring 1991): 89106.
Hawley, Ellis. The New Deal and the Problem of Monopoly. Princeton, NJ: Princeton University Press, 1974.
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): 163234.
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.
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.
Martins, Joaquim Oliveira, Stefano, Scarpetta, and Dirk, Pilat. “Mark-Up Pricing, Market Structure, and the Business Cycle.OECD Economic Studies 27 (1996): 71106.
Mills, Frederick. The Behavior of Prices. New York: NBER, 1927.
Nevo, Aviv. “Measuring Market Power in the Ready-to-Eat Cereal Industry.Econometrica (69), no. 2 (2001): 307–42.
Pennock, Pamela. “The National Recovery Administration and the Rubber Tire Industry, 1933–1935.” Business History Review (71), no. 4 (1997): 543–68.
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.
Romer, Christina. “Why Did Prices Rise in the 1930s?The Journal of Economic History (59), no. 1 (1999): 167–99.
Roos, Charles Frederick. NRA Economic Planning. New Haven, CT: Cowles Foundation, 1935.
Julio, Rotemberg, and Saloner, Garth. “A Supergame-Theoretic Model of Price Wars During Booms.American Economic Review (76), no. 3 (1986): 390407.
Schlesinger, Arthur M. The Crisis of the Old Order: 1919–1933, The Age of Roosevelt, Volume I. New York: Mariner Books, 2003.
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.
Tappata, Mariano. “Rockets and Feathers: Understanding Asymmetric Pricing.RAND Journal of Economics 40, no. 4 (Winter 2009): 673–87.
Taylor, Jason. “The Output Effects of Government-Sponsored Cartels During the New Deal.Journal of Industrial Economics (50), no. 1 (2002): 110.
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): 597624.
Ziebarth, Nicolas L. “The Great Depression through the Eyes of the Census of Manufactures.Unpublished Manscript, University of Iowa, 2013.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

The Journal of Economic History
  • ISSN: 0022-0507
  • EISSN: 1471-6372
  • URL: /core/journals/journal-of-economic-history
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×

Metrics

Altmetric attention score

Full text views

Total number of HTML views: 6
Total number of PDF views: 77 *
Loading metrics...

Abstract views

Total abstract views: 321 *
Loading metrics...

* Views captured on Cambridge Core between September 2016 - 17th July 2018. This data will be updated every 24 hours.