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I examine the impact of competition on wages and productivity using a panel data set of U.K. manufacturing industries over 1954-1973. The introduction of cartel law in the United Kingdom in the late 1950s caused an intensification of price competition in previously cartelized manufacturing industries, but it did not affect those industries that were not cartelized. The econometric results from a comparison of the two groups of industries before and after the introduction of cartel law provide strong evidence of a negative effect of collusion on labor productivity growth. There is no evidence of any effect of collusion on wages. These results are robust to controlling for the potential endogeneity of collusion and are further strengthened by a comparison with U.S. data.

I analyse the effect of collusion on profitability with the use of evidence from a natural experiment of policy reform: the introduction of anti-cartel legislation in the UK in the late 1950s. This caused an intensification of price competition in previously collusive industries but did not affect industries that had not been collusive. Three main results are established: First, a comparison of the two groups of industries shows that the breakdown of collusion had no significant overall effect on profitability in the long run—although it had a strong negative effect on firm numbers. Second, the larger was the decrease in firm numbers, the smaller was the decline of profitability in previously collusive industries; however, no such correlation exists in industries that were not affected by the cartel law. Third, most cartels did not restrict entry; but in industries where entry had been restricted, profitability rather than firm numbers decreased when collusion broke down. These results are consistent with theories that emphasise the role of entry conditions for profitability: Cartels are often unprofitable because of entry even when collusion is effective.

I examine the effect of competition on the production and use of innovations using evidence from a natural experiment of policy reform, the introduction of cartel legislation in the U.K. in the late 1950’s. I compare manufacturing industries which had been collusive and were therefore affected by the policy with those that had been competitive and were not affected. The intensification of competition following the abolition of cartels caused a short-run decrease in innovations produced, but had no significant effect in the long run. In contrast, innovations used increased both in the short run and in the long run.

I examine the factors facilitating or hindering collusion using a comprehensive data set on the incidence of price-fixing across UK manufacturing industries in the 1950s. The econometric results suggest that collusion is more likely the higher the degree of capital intensity and less likely in advertising-intensive than in low-advertising industries. There is also some evidence of a non-monotonic relationship between market growth and the likelihood of collusion. There is no clear link between concentration and the incidence of collusion.

Although several studies have examined the link between competition and average earnings and others have focussed on the magnitude and determinants of establishment wage differentials, very little is known about the effect of competition on the intra-industry dispersion of earnings. Using a comprehensive data set on the incidence of price-fixing across British manufacturing industries in the 1950s, I compare collusive and competitive industries and find strong evidence of a negative effect of collusion on the intra-industry dispersion of plant average earnings. This result is robust to controlling for the potential endogeneity of collusion.

I examine the impact of competition on wages and productivity using a panel data set of U.K. manufacturing industries over 1954-1973. The introduction of cartel law in the United Kingdom in the late 1950s caused an intensification of price competition in previously cartelized manufacturing industries, but it did not affect those industries that were not cartelized. The econometric results from a comparison of the two groups of industries before and after the introduction of cartel law provide strong evidence of a negative effect of collusion on labor productivity growth. There is no evidence of any effect of collusion on wages. These results are robust to controlling for the potential endogeneity of collusion and are further strengthened by a comparison with U.S. data. Reprinted by permission of the MIT Press

This paper examines the impact of firms' conduct on market structure. It studies the evolution of concentration in UK manufacturing following the abolition of cartels using a theoretical framework based on Sutton's theory of market structure and a panel data set of four-digit industries over 1958-1977. The econometric results suggest that the intensity of price competition has a positive effect on concentration in exogenous sunk cost industries as well as in advertising-intensive and R&D-intensive industries. The concentration-market size relationship, while negative in exogenous sunk cost industries, breaks down in industries with high advertising or R&D intensity.