Résultats de recherche
Creator: Holmes, Thomas J. and Schmitz, James Andrew Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 545 Abstract:
This paper develops a model of small business failure and sale that is motivated by recent evidence concerning how the failure and sale of small businesses vary with the age of the business and the tenure of the manager. This evidence motivates two key features of the model: A match between the manager and the business, and characteristics of businesses that survive beyond the current match. The parameters of the model are estimated, and the properties of this parametric model are studied. This analysis results in a simple characterization of the workings of the small business sector.
Creator: Bridgman, Benjamin, Qi, Shi, and Schmitz, James Andrew Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 519 Abstract:
The idea that cartels might reduce industry productivity by misallocating production from high to low productivity producers is as old as Adam. However, the study of the economic consequences of cartels has almost exclusively focused on the losses from higher prices (i.e., Harberger triangles). Yet, as the old idea suggests, we show that the rules for quotas and side payments in the New Deal sugar cartel led to significant misallocation of production. The resulting productivity declines essentially destroyed the entire cartel profit. The magnitude of the deadweight losses (relative to value added) was large: we estimate a lower bound for the losses equal to 25 percent and 42 percent in the beet and cane industries, respectively.
Mot-clé: Quota, Monopoly, and Cartels Assujettir: L60 - Industry Studies: Manufacturing: General, L00 - Industrial Organization: General, and L43 - Legal Monopolies and Regulation or Deregulation
Creator: Bridgman, Benjamin, Maio, Michael, Schmitz, James Andrew, and Teixeira, Arilton Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 477 Abstract:
Beginning in the early 1900s, Puerto Rican sugar has entered the U.S. mainland tariff free. Given this new status, the Puerto Rican sugar industry grew dramatically, soon far outstripping Louisiana’s production. Then, in the middle 1960s, something amazing happened. Production collapsed. Manufacturing sugar in Puerto Rico was no longer profitable. Louisiana, in contrast, continued to produce and grow sugar. We argue that local economic policy was responsible for the industry’s demise. In the 1930s and 1940s, the local Puerto Rican government enacted policies to stifle the growth of large cane-farms. As a result, starting in the late 1930s, farm size fell, mechanization of farms essentially ceased, and the Puerto Rican sugar industry’s productivity (relative to Louisiana) rapidly declined until the industry collapsed. The overall Puerto Rican economy also began to perform poorly in the late 1930s. In particular, Puerto Rico’s per capita income was converging to that of the poorest U.S. states until the late 1930s, but since then it has lost ground to these states. One naturally wonders: was the poor overall performance of the Puerto Rican economy also the result of policy? We show that Puerto Rico embarked on other economic policies in the early 1940s that proved to be major setbacks to its economic development.
Mot-clé: Industrial policy, Sugar, Puerto Rico , and Land Assujettir: N56 - Economic History: Agriculture, Natural Resources, Environment, and Extractive Industries: Latin America; Caribbean and L52 - Industrial Policy; Sectoral Planning Methods
Creator: Schmitz, James Andrew Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 468 Abstract:
Fifty-eight years ago, Harberger (1954) estimated that the costs of monopoly, which resulted from misallocation of resources across industries, were trivial. Others showed the same was true for tariffs. This research soon led to the consensus that monopoly costs are of little significance—a consensus that persists to this day.
This paper reports on a new literature that takes a different approach to the costs of monopoly. It examines the costs of monopoly and tariffs within industries. In particular, it examines the histories of industries in which a monopoly is destroyed (or tariffs greatly reduced) and the industry transitions quickly from monopoly to competition. If there are costs to monopoly and high tariffs within industries, we should be able to see these costs whittled away as the monopoly is destroyed.
In contrast to the prevailing consensus, this new research has identified significant costs of monopoly. Monopoly (and high tariffs) is shown to significantly lower productivity within establishments. It also leads to misallocation within industry: resources are transferred from high to low productivity establishments.
From these histories a common theme (or theory) emerges as to why monopoly is costly. When a monopoly is created, “rents” are created. Conflict emerges among shareholders, managers, and employees of the monopoly as they negotiate how to divide these rents. Mechanisms are set up to split the rents. These mechanisms are often means to reduce competition among members of the monopoly. Although the mechanisms divide rents, they also destroy them (by leading to low productivity and misallocation).
Mot-clé: Monopoly, X-inefficiency, Rent seeking, and Competition Assujettir: F10 - Trade: General, L00 - Industrial Organization: General, and D20 - Production and Organizations: General
Creator: Holmes, Thomas J. and Schmitz, James Andrew Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 439 Abstract:
Does competition spur productivity? And if so, how does it do so? These have long been regarded as central questions in economics. This essay reviews the literature that makes progress toward answering both questions.
Mot-clé: Monopoly, Innovation, and Market power
Creator: Bridgman, Benjamin, Qi, Shi, and Schmitz, James Andrew Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 437 Abstract:
We study the U.S. sugar manufacturing cartel that was created during the New Deal. This was a legal-cartel that lasted 40 years (1934-74). As a legal-cartel, the industry was assured widespread adherence to domestic and import sales quotas (given it had access to government enforcement powers). But it also meant accepting government-sponsored cartel-provisions. These provisions significantly distorted production at each factory and also where the industry was located. These distortions were reflected in, for example, a declining industry recovery rate, that is, the pounds of white sugar produced per ton of beets. It declined from about 310 pounds in 1934 to 240 pounds in 1974. The cartel provisions also distorted the location of industry. For example, it kept production in California and the Far West. Since the cartel ended in 1974, California's share of sugar production has dropped dramatically.
Creator: Herrendorf, Berthold, Schmitz, James Andrew, and Teixeira, Arilton Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 425 Abstract:
We study the effects of large transportation costs on economic development. We argue that the Midwest and the Northeast of the U.S. is a natural case because starting from 1840 decent data is available showing that the two regions shared key characteristics with today’s developing countries and that transportation costs were large and then came way down. To disentangle the effects of the large reduction in transportation costs from those of other changes that happened during 1840–1860, we build a model that speaks to the distribution of people across regions and across the sectors of production. We find that the large reduction in transportation costs was a quantitatively important force behind the settlement of the Midwest and the regional specialization that concentrated agriculture in the Midwest and industry in the Northeast. Moreover, we find that it led to the convergence of the regional per capita incomes measured in current regional prices and that it increased real GDP per capita. However, the increase in real GDP per capita is considerably smaller than that resulting from the productivity growth in the nontransportation sectors.
Mot-clé: Settlement, Transportation costs, Regional income covergence, and Structural transformation Assujettir: O11 - Macroeconomic Analyses of Economic Development, O18 - Economic Development: Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure, and O41 - One, Two, and Multisector Growth Models
Creator: Holmes, Thomas J., Levine, David K., and Schmitz, James Andrew Series: Staff report (Federal Reserve Bank of Minneapolis. Research Department) Number: 402 Abstract:
Arrow (1962) argued that since a monopoly restricts output relative to a competitive industry, it would be less willing to pay a fixed cost to adopt a new technology. Arrow’s idea has been challenged and critiques have shown that under different assumptions, increases in competition lead to less innovation. We develop a new theory of why a monopolistic industry innovates less than a competitive industry. The key is that firms often face major problems in integrating new technologies. In some cases, upon adoption of technology, firms must temporarily reduce output. We call such problems switchover disruptions. If firms face switchover disruptions, then a cost of adoption is the forgone rents on the sales of lost or delayed production, and these opportunity costs are larger the higher the price on those lost units. In particular, with greater monopoly power, the greater the forgone rents. This idea has significant consequences since if we add switchover disruptions to standard models, then the critiques of Arrow lose their force: competition again leads to greater adoption. In addition, we show that our model helps explain the accumulating evidence that competition leads to greater adoption (whereas the standard models cannot).
Assujettir: D21 - Firm Behavior: Theory, L14 - Transactional Relationships; Contracts and Reputation; Networks, D42 - Market Structure, Pricing, and Design: Monopoly, O33 - Technological Change: Choices and Consequences; Diffusion Processes, L12 - Monopoly; Monopolization Strategies, and O32 - Management of Technological Innovation and R&D