Cementing the case for collusion under the National Recovery Administration

Macroeconomists have long debated the aggregate effects of anti-competitive provisions under the “Codes of Fair Conduct” promulgated by the National Industrial Recovery Act (NIRA). Despite the emphasis on these provisions, there is only limited evidence documenting any actual effects at the micro-level. We use a combination of narrative evidence and a novel plant-level dataset from 1929, 1931, 1933, and 1935 to study the effects of the NIRA in the cement industry. We develop a test for collusion specific to this particular industry. We find strong evidence that before the NIRA, the costs of a plant's nearest neighbor had a positive effect on a plant's own price, suggesting competition. After the NIRA, this effect is completely eliminated, with no correlation between a plant's own price and its neighbor's cost.