Mergers, Foreign Entry, and Jobs: Evidence from the U.S. Appliance Industry

Felix Montag

No 2207, CEPREMAP Working Papers (Docweb) from CEPREMAP

Abstract: Proponents of industrial policy argue that merger control should consider domestic employment. I propose a model to assess how a product market merger affects rival product entry, consumer welfare, and domestic employment. Firms endogenously decide which products to offer. Domestic jobs depend on production locations and equilibrium quantities in the product market. I estimate the structural parameters of this model for the U.S. home appliance industry. Using the structural model, I examine the impact of Whirlpool’s acquisition of Maytag and compare it to the impact of a counterfactual acquisition by a foreign buyer with no prior presence in the U.S. market. Four key findings emerge from the comparison of these two acquisitions: First, rival product entry is mostly independent of the acquirer. Second, a Whirlpool acquisition leads to the removal of more merging party products. Third, it always leads to lower consumer welfare. Fourth, a Whirlpool acquisition leads to a smaller decrease in U.S. employment. I use these results to estimate the job value necessary for domestic employment effects to offset consumer welfare losses.

Keywords: merger; jobs; Appliance Industry (search for similar items in EconPapers)
Pages: 81 pages
Date: 2022-06
New Economics Papers: this item is included in nep-com, nep-ind and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:cpm:docweb:2207

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