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Title: Adaptation and Survival in the Brewing Industry during Prohibition

Citation Type: Miscellaneous

Publication Year: 2016

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Abstract: Can early exposure to demand reductions improve the performance of firms during future demand shocks? I focus on the American brewing industry during prohibition in the early twentieth century. Some breweries faced early reductions in demand when nearby counties introduced prohibition at the local level. Other breweries were insulated from local prohibitions until the start of federal prohibition, when the entire US prohibited the production and distribution of alcoholic drinks. I follow 1,300 breweries throughout both local and federal prohibitions, using firm-level data that I collected. Breweries that faced early reductions in demand were 12% more likely to survive the full prohibition period, from before local prohibition until the end of federal prohibition, than breweries that did not face early reductions in demand. This increase in survival occurred because a group of breweries made early investments in machinery that later facilitated product switching into soda and other foodstuffs. Based on a theoretical model and my identification strategy, I argue that this group of breweries would not have survived prohibition, had they not faced an early reduction in demand.

Url: http://www.cehernandez.info/research

User Submitted?: No

Authors: Hernandez, Carlos Eduardo

Publisher: UCLA

Data Collections: IPUMS NHGIS

Topics: Other

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