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

Cartel Attributes and Cartel Performance: The Impact of Trade Associations

“…Taylor [] examines the codes of fair competition associated with 66 industries for which monthly output data are available in the NBER's Macrohistory Database and he creates dummy variables representing the presence of seven separate cartel provisions in the codes. These include requirements that changes in price had to be filed with the cartel board in advance (generally three to five days), requirements that firms file data regularly with the cartel board, a provision saying the cartel board could inspect the books of any firm on demand, restrictions against prices below cost, restrictions on machine and plant hours of operation, the imposition of production quotas, and restrictions on new capacity.…”

“…These have generally focused upon industry characteristics such as the number of firms, the presence of entry barriers, price elasticity of demand, the degree of homogeneity of the industry's output, and so on. More recent studies such as Genesove and Mullin [], Zimmerman and Connor [], Levinstein and Suslow [, ] and Taylor [] have focused on how internal cartel organization affects cartel performance. Most related to the paper here, Taylor's findings suggest that industries whose cartel ‘codes’—that is, their set of rules specifying what cartel members can and cannot do—contained production quotas, data‐filing requirements, and restrictions against new productive capacity, were more successful at bringing about collusive outcomes during a two‐year cartel experiment during the Great Depression known as the National Industrial Recovery Act (NIRA).…”

What Was New About the New Deal?

“…Alexander (1997) and Klein and Taylor (2008) show the effect of diversity on difficulties in agreeing on and enforcing codes. Klein and Taylor (2008) and Taylor (2007Taylor ( , 2010 analyze the impact of NRA codes and PRA agreements on prices and quantity in various industries. 26 For discussions of Hoover's high wage policies, see Ohanian (2011) and Rose (2010).…”

Breaking Up Is Hard to Do: Determinants of Cartel Duration

“…Similarly, Dye and Sicotte (2006) examine the 1931 negotiations of the international sugar cartel and show that cartels function as governance mechanisms to implement and renegotiate incomplete contracts. Taylor (2007) finds that more complex agreements were more successful at reducing output under the National Industrial Recovery Act of 1933. In particular, he finds that agreements with explicit monitoring, quotas, and restrictions on new productive capacity were more successful.…”