Another Look At The Impact Of The National Industrial Recovery Act On Cartel Formation And Maintenance Costs

Matthew B. Krepps

The Review of Economics and Statistics, 1997, vol. 79, issue 1, 151-154

Abstract: Alexander's (1994) finding that the National Recovery Administration's Codes of Fair Competition led to a change in the critical concentration level during the 1930s is questioned. No regime switch is detected when a common industry sample is employed. Also, when industries with and without codes are analyzed, codes appear to have no effect on price-cost margins during the period. This absence of effect is postulated to be a result of the unenforceability of trade practice provisions contained in many codes. The empirical results of this paper suggest that the existence of codes was not sufficient to enable industries to overcome cartel formation costs. Only easily enforceable trade practice provisions appear to have affected the structure-performance relation in the period following repeal of the National Industrial Recovery Act. © 1997 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

Date: 1997
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