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Evidence for the Effects of Mergers on Market Power and Efficiency

Bruce Blonigen and Justin Pierce ()

No 2016-082, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Study of the impact of mergers and acquisitions (M&As) on productivity and market power has been complicated by the difficulty of separating these two effects. We use newly-developed techniques to separately estimate productivity and markups across a wide range of industries using detailed plant-level data. Employing a difference-in-differences framework, we find that M&As are associated with increases in average markups, but find little evidence for effects on plant-level productivity. We also examine whether M&As increase efficiency through reallocation of production to more efficient plants or through reductions in administrative operations, but again find little evidence for these channels, on average. The results are robust to a range of approaches to address the endogeneity of firms' merger decisions.

Keywords: Acquisitions; Efficiency; Market Power; Markups; Mergers; Productivity (search for similar items in EconPapers)
JEL-codes: D24 G34 L41 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2016-10
New Economics Papers: this item is included in nep-com, nep-eff and nep-law
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http://www.federalreserve.gov/econresdata/feds/2016/files/2016082pap.pdf (application/pdf)

Related works:
Working Paper: Evidence for the Effects of Mergers on Market Power and Efficiency (2016) Downloads
Working Paper: Evidence for the Effects of Mergers on Market Power and Efficiency (2016) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2016-82

DOI: 10.17016/FEDS.2016.082

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