Northern French coal companies performances in 1935-1945: A panel data analysis

This analysis is about Nord-Pas-de-Calais (NPC) coal firms during the 1935-1945 period. During the inter-war, NPC coal basin was the main one in France. The fact that France has never been self-sufficient in coal mineral reinforced NPC's strategic importance. French government encouraged Northern collieries to reinforce collusion on a regional level in order to resist to the foreign pressure so that during the thirties, coal companies evolved through collusive strategies. During the second part of the thirties French government's intervention on NPC collieries was reinforced by laws of August 18th and 19th 1936 that introduced a control on coal prices. The law of July 11th 1938 on war-time economy reinforced State's presence on the economic level. Government's intervention on Northern coal companies was due to the necessity for the national war industry to obtain coal mineral mainly from domestic basins. A decree dated from October 4th 1939 conduced coal firms to loose their ability to sell their production by themselves. Government's presence inside collieries was confirmed during the beginning of the 40's through various decrees. Through this econometric analysis, we try to reply to the two following questions: (i) In spite of laws of August 1936 on coal prices, were Northern collieries still maximising profit firms? (ii) Did the set up of the decree on war economy induced a significant change in NPC coal companies' behaviour?We test the hypothesis that NPC coal companies operated inside a competitive environment until October 1939 in the sense that firms maximized their profits after what they weren't able to freely pursue such an objective due to the State's presence inside the coal industry. The statistical material used is an annual panel data sample of ten firms corresponding to nearly 70 percents of the NPC basin's production. These data have been collected through personal searches developed in Northern French's archives, namely Centre des Archives du Monde du Travail and Centre Historique Minier. Annual individual profit data have been obtained from companies' annual balance sheet. Our panel data sample conduces us to shed light on main determinants of NPC firms' profits. We base our analysis on theoretical results derived from Industrial Organisation (I. O.) models based on the profit-maximizing hypothesis. We consider also different annual indexes (excess production capacity; individual market share; import index; etc.). The general specification of the model considered is given below:PROFIT = f (CAPA, PARTIND, QHINDIV, CONJ, QHLORR, TIME, PE, DUMMIES)With PROFIT: Individual profits; CAPA: Excess capacity of NPC's coal production; PARTIND: Individual market shares; QHINDIV: Individual coal production; CONJ: French industrial production; QHLORR: Coal production from Lorraine coal-basin; TIME: time trend; PE: Imports of coal, coke and briquettes; DUMMIES: various binary variables. First, we estimate from 1935 to 1945 a model in which annual individual profits data are explained by various variables mentioned above and two dummies DUM3538 et DUM3539 respectively equal to one on 1939-1945 and 1940-1945. These dummies are introduced in order to consider a possible change in October 1939 . Estimates on various specifications show that binary variables differ significantly from zero so that there exists a change in 1938-1939. Next, we consider two sub-periods around 1938-1939. In the 1935-1938 sub-period, various specifications of the model are estimated. A similar approach is performed in 1939-1945. By comparing estimates obtained in the two sub-periods, we show that the sign of coefficients associated to several variables (CONJ, PE, CAPAIND) are reversed from one period to the second one. Interpretation of each estimate permits us to show that in spite of laws of August 18th and 19th 1936, Northern French coal companies operated inside a competitive economy in the first sub-period while after 1939 they operated inside a planed environment. A significant change in NPC firms strategic behaviour can be highlighted between ex ante and ex post periods.