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Cartel Code Attributes and Cartel Performance: An Industry-Level Analysis of the National Industrial Recovery Act

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  • Jason E. Taylor

Abstract

This paper uses the cartel-enabling National Industrial Recovery Act (NIRA) of 1933 to gain insight into cartel performance. I employ a monthly panel of 66 industries that passed an NIRA code of fair competition to examine how specific attributes of these cartel codes affected the ability to achieve collusive outcomes. I find that output growth was significantly lower during cartel months, consistent with cartel theory, and that industries with more complex codes were more successful than those with simpler ones. Furthermore, industries with code restrictions on new productive capacity, production quotas, and requirements to file data with a central board were the most successful at reducing output, which suggests that these types of provisions were the most effective in helping firms attain collusive outcomes. Finally, I find that the effectiveness of data-filing provisions was limited to the early months of the NIRA, prior to a wave of cartel breakdown occurring in spring 1934.

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  • 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.
    • Handle: RePEc:ucp:jlawec:v:50:y:2007:p:597-624
    DOI: 10.1086/519808
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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. 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.
    3. 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.
    4. Benjamin Bridgman & Shi Qi & James A. Schmitz, 2015. "Cartels Destroy Productivity: Evidence from the New Deal Sugar Manufacturing Cartel, 1934-74," Staff Report 519, Federal Reserve Bank of Minneapolis.
    5. Chicu, Mark & Vickers, Chris & Ziebarth, Nicolas L., 2013. "Cementing the case for collusion under the National Recovery Administration," Explorations in Economic History, Elsevier, vol. 50(4), pages 487-507.
    6. Taylor, Jason E. & Neumann, Todd C., 2013. "The effect of institutional regime change within the new deal on industrial output and labor markets," Explorations in Economic History, Elsevier, vol. 50(4), pages 582-598.
    7. Price V. Fishback & John Joseph Wallis, 2012. "What Was New About the New Deal?," NBER Working Papers 18271, National Bureau of Economic Research, Inc.
    8. 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.
    9. Zhou, J., 2012. "Endogenous Lysine Strategy Profile and Cartel Duration : An Instrumental Variables Approach," Other publications TiSEM 07e13758-7077-436a-b7d9-3, Tilburg University, School of Economics and Management.
    10. Margaret C. Levenstein & Valerie Y. Suslow, 2011. "Breaking Up Is Hard to Do: Determinants of Cartel Duration," Journal of Law and Economics, University of Chicago Press, vol. 54(2), pages 455-492.
    11. Ari Hyytinen & Frode Steen & Otto Toivanen, 2019. "An Anatomy of Cartel Contracts," The Economic Journal, Royal Economic Society, vol. 129(621), pages 2155-2191.
    12. Zhou, J., 2012. "Endogenous Lysine Strategy Profile and Cartel Duration : An Instrumental Variables Approach," Discussion Paper 2012-009, Tilburg University, Tilburg Law and Economic Center.
    13. Holt, Andrew Chase, 2024. "Monopsony power in the United States: Evidence from the great depression," Explorations in Economic History, Elsevier, vol. 92(C).
    14. Adam Smith & Richard Wagner & Bruce Yandle, 2011. "A theory of entangled political economy, with application to TARP and NRA," Public Choice, Springer, vol. 148(1), pages 45-66, July.

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