The Econometric SocietyEdited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262
Econometrica: May, 2013, Volume 81, Issue 3
https://doi.org/10.3982/ECTA6877
p. 1003-1037
Allan Collard‐Wexler
I investigate the role of demand shocks in the ready‐mix concrete industry. Using Census data on more than 15,000 plants, I estimate a model of investment and entry in oligopolistic markets. These estimates are used to simulate the effect of eliminating short‐term local demand changes. A policy of smoothing the volatility of demand has a market expansion effect: The model predicts a 39% increase in the number of plants in the industry. Since bigger markets have both more plants and larger plants, a demand‐smoothing fiscal policy would increase the share of large plants by 20%. Finally, the policy of smoothing demand reduces entry and exit by 25%, but has no effect on the rate at which firms change their size.
This appendix contains material not found in the manuscript. It includes a description of algorithm used in the paper, more detail on data assembly, as well as robustness checks on the results in the paper.
This zip file contains the replication files for the manuscript.
