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Merger Guidelines for the Labor Market

David Berger, Thomas Hasenzagl, Kyle Herkenhoff, Simon Mongey and Eric A. Posner

No 31147, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: While the labor market implications of mergers have historically been ignored, recent actions by the Department of Justice (DOJ) place buyer market power (i.e., monopsony) at the forefront of antitrust policy. We develop a theory of multi-plant ownership and monopsony to help guide this new policy focus. We estimate the model using U.S. Census data and demonstrate the model’s ability to replicate empirically documented paths of employment and wages following mergers. We then simulate a representative set of U.S. mergers in order to evaluate merger review thresholds. Our main exercise applies the DOJ and FTC’s product market concentration thresholds to local labor markets. Assuming mergers generate efficiency gains of 5 percent, our simulations suggest that workers are harmed, on average, under the enforcement of the more lenient 2010 merger guidelines and unharmed, on average, under enforcement of the more stringent 1982 merger guidelines. We also provide a framework for further research evaluating alternative concentration thresholds based on assumptions about the efficiency effects of mergers and the resource constraints of regulators. Finally, we provide guidance for using the Gross Downward Wage Pressure method for evaluating the impact of mergers on labor markets.

JEL-codes: D40 E20 H0 J0 K0 L0 (search for similar items in EconPapers)
Date: 2023-04
New Economics Papers: this item is included in nep-com, nep-ind, nep-lab, nep-law and nep-reg
Note: EFG IO LE LS PE
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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