The Trade and Welfare Effects of Mergers in Space

Hartmut Egger () and Peter Egger

No 2217, CESifo Working Paper Series from CESifo

Abstract: This paper analyzes the consequences of cross-border mergers in a spatial framework, thereby distinguishing three channels of influence: a price increase due to the elimination of product market competition, an adjustment in plant location which reduces overall transportation cost expenditures, and a harmonization in production costs due to a technology transfer within the firm. The welfare analysis illustrates that larger countries are better off after the merger. By contrast, smaller countries may lose, if the pre-merger production cost differential across firms is negligible and/or a post-merger technology transfer across production sites is infeasible. Furthermore, the analysis provides novel insights into the trade pattern effects of a merger. In this respect, the main result of the paper is that an adjustment of plant location in space can reverse the direction of (net) trade flows.

Keywords: spatial competition; cross-border merger; trade pattern; welfare analysis (search for similar items in EconPapers)
JEL-codes: F12 F23 L10 (search for similar items in EconPapers)
Date: 2008
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Related works:
Journal Article: The trade and welfare effects of mergers in space (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_2217

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