Econometrica: May 2013, Volume 81, Issue 3

Demand Fluctuations in the Ready‐Mix Concrete Industry

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.

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Supplement to "Demand Fluctuations in the Ready-Mix Concrete Industry"

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.

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Supplement to "Demand Fluctuations in the Ready-Mix Concrete Industry"

This zip file contains the replication files for the manuscript.

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