Working Paper: NBER ID: w13138
Authors: Alexandre Mas
Abstract: This paper examines the construction equipment resale market to assess whether equipment produced by the world's largest manufacturer of construction machinery, Caterpillar, experienced lower product quality in facilities that underwent contract disputes during the 1990's. Analysis of auction data reveals that resale market participants significantly discounted machines produced in these dispute-affected facilities. Additionally, pieces of equipment produced in facilities undergoing unrest were resold more often, received worse appraisal reports, and had lower list prices. Taken together, the evidence supports the hypothesis that workmanship at dispute-affected facilities declined, and that the resulting impact on the economic quality of the equipment produced was significant. The dispute was associated with at least $400 million in lost service flows due to inferior quality equipment alone.
Keywords: No keywords provided
JEL Codes: D18; D2; J0; J3; J41; J5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| labor unrest (J52) | reduced quality of equipment (L15) |
| reduced quality of equipment (L15) | discounted resale prices (L42) |
| labor unrest (J52) | discounted resale prices (L42) |
| labor unrest (J52) | lost service flows due to inferior quality equipment (L15) |
| reduced quality of equipment (L15) | lost service flows due to inferior quality equipment (L15) |