Competition and Long-run Productivity Growth in the UK and US Tobacco Industries, 1879-1939

The UK and US tobacco industries provide a particularly clean place to examine the impact of changes in market structure on firm conduct and productivity in a rapidly innovating industry. Although each industry had roughly equal access to new manufacturing technologies, the industries were monopolized at different times. The US lost an early productivity lead after the formation of the Tobacco Trust in 1890, but regained it after the UK industry merged to monopoly in 1902 and the Trust was broken up in 1911. Supplementary evidence suggests that technological innovation and consolidation of production were more rapid during competitive periods.