Does State Antitrust Enforcement Drive Establishment Exit?

32 Pages Posted: 18 Sep 2013  

Robert M. Feinberg

American University - Department of Economics

Thomas A. Husted

American University - Department of Economics

Florian Szücs

Vienna University of Economics and Business

Date Written: August 1, 2013

Abstract

Previous work has shown that state-level antitrust enforcement activity may have impacts on entry and relocation behavior by U.S. firms. Significant state-level antitrust activity may be an indicator of a perceived adverse business environment and it is found to deter establishment entry, particularly for larger firms in the retail and wholesale sectors. An obvious question is whether establishment exit is affected in a symmetric way, or whether sunk costs of market entry may lead to a smaller impact in terms of the exit decisions. We first combine US Census establishment exit panel data with data for 1998-2006 on US state-level antitrust activity and other measures of state-level business activities that may affect establishment exit. We also consider establishment exit across different broad industry types -- manufacturing, retail and wholesale -- and several firm size categories. Local business cycle factors seem to be the primary driver of exit, though there is some evidence of political and antitrust determinants as well. In another approach, we examine firm-level exit decisions and the extent to which these respond to state antitrust enforcement, with some indication of antitrust enforcement effects here as well, especially in the wholesale and retail sectors.

Keywords: antitrust enforcement, state level, firm exit

JEL Classification: K21, L41, L60, L81

Suggested Citation

Feinberg, Robert M. and Husted, Thomas A. and Szücs, Florian, Does State Antitrust Enforcement Drive Establishment Exit? (August 1, 2013). DIW Berlin Discussion Paper No. 1323. Available at SSRN: https://ssrn.com/abstract=2327484 or http://dx.doi.org/10.2139/ssrn.2327484

Robert M. Feinberg

American University - Department of Economics ( email )

4400 Massachusetts Avenue, N.W.
Washington, DC 20016-8029
United States
202-885-3770 (Phone)
202-885-3790 (Fax)

Thomas A. Husted

American University - Department of Economics ( email )

4400 Massachusetts Avenue, N.W.
Washington, DC 20016-8029
United States

Florian Szücs (Contact Author)

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

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