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Report
Transportation and development: insights from the U.S., 1840-1860
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 ...
Report
Does regulation reduce productivity? Evidence from regulation of the U.S. beet-sugar manufacturing industry during the Sugar Acts, 1934-74
We study the impact of regulation on productivity and welfare in the U.S. sugar manufacturing industry. While this U.S. industry has been protected from foreign competition for nearly 150 years, it was regulated only during the Sugar Act period, 1934-74. We show that regulation significantly reduced productivity, with these productivity losses leading to large welfare losses. Our initial results indicate that the welfare losses are many times larger than those typically studied ? those arising from higher prices. We also argue that the channels through which regulation led to large ...
Discussion Paper
New and Larger Costs of Monopoly and Tariffs
Fifty-eight years ago, Harberger (1954) estimated that the costs of monopoly, which resulted from misallocation of resources across industries, were trivial. Others showed that 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 ...
Report
Government production of investment goods and aggregate labor productivity
In this paper, I estimate the impact on aggregate labor productivity of having government, rather than private industry, produce investment goods. This policy was pursued to varying degrees by Egypt, India, Turkey, among others. The policy has a large impact because there is both a direct effect (on the production function in the investment sector) and a secondary effect (on the economy-wide capital stock per worker). I estimate that this policy alone accounted for about one-third of Egypt's aggregate labor productivity gap with the United States during the 1960s.
Report
Threats to industry survival and labor productivity: world iron-ore markets in the 1980's
In the early 1980?s, the world steel market collapsed. Since the almost exclusive use of iron-ore is in steel production, many iron-ore mines had to be shut down. We divide the major iron-ore producing countries into groups based on the threat of closure faced by iron-ore mines in the respective country. In countries where mines faced no threat of closure, the iron-ore industry had little or no productivity gain over the decade. In countries where mines faced a large threat of closure, the industry typically had productivity gains ranging from 50 to 100 percent, gains that were unprecedented. ...
Report
What determines productivity? lessons from the dramatic recovery of the U.S. and Canadian iron-ore industries following their early 1980s crisis
Great Lakes iron ore producers had faced no competition from foreign iron ore in the Great Lakes steel market for nearly a century as the 1970s closed. In the early 1980s, as a result of unprecedented developments in the world steel market, Brazilian producers were offering to deliver iron ore to Chicago (the heart of the Great Lakes market) at prices substantially below local iron ore prices. The U.S. and Canadian iron ore industries faced a major crisis that cast doubt on their future. In response to the crisis, these industries dramatically increased productivity. Labor productivity ...
Report
Explaining cross-country income differences
This chapter reviews the literature that tries to explain the disparity and variation of GDP per worker and GDP per capita across countries and across time. There are many potential explanations for the different patterns of development across countries, including differences in luck, raw materials, geography, preferences, and economic policies. We focus on differences in economic policies and ask to what extent can differences in policies across countries account for the observed variability in income levels and their growth rates. We review estimates for a wide range of policy variables. In ...
Working Paper
Because of Monopolies, Income Inequality Significantly Understates Economic Inequality
In social science research, household income is widely used as a stand-in for, or approximation to, the economic well-being of households. In a parallel way, income-inequality has been employed as a stand-in for inequality of economic well-being, or for brevity, "economic-inequality." But there is a force in market economies, ones with extensive amounts of monopoly, like the United States, which leads income-inequality to understate economic-inequality. This force has not been recognized before and derives from how monopolies behave. Monopolies, of course, raise prices. This reduces the ...
Report
Resistance to technology and trade between areas
Why are methods of production used in an area when more 'efficient' methods are available? This paper explores a 'resistance to technology' explanation. In particular, the paper attempts to understand why some industries, like the construction industry, have had continued success in blocking new methods, while others have met failure, like the dairy industry's recent attempt to block bST. We develop a model which shows that how easily goods move between areas determines in part the extent of resistance to new methods in an area.
Report
Privatization's impact on private productivity: the case of Brazilian iron ore
A major motivation for the wave of privatizations of state-owned enterprises (SOEs) in the last twenty years was a belief that privatization would increase economic efficiency. There are now many studies showing most privatizations achieved this goal. Our theme is that the productivity gains from privatization are much more general and widespread than has typically been recognized in this literature. In assessing the productivity gains from privatization, the literature has only examined the productivity gains accruing at the privatized SOEs. But privatization may have significant impact on ...