Mergers and Acquisitions, Technological Change and Inequality
65 Pages Posted: 13 Jun 2016 Last revised: 7 Jan 2018
Date Written: January 2018
This paper documents important shifts in occupational composition following merger and acquisition (M&A) activity as well as increases in median wages and wage inequality. We propose M&As act as a catalyst for skill-biased and routine-biased technological change. We argue that due to an increase in scale, improved efficiency or lower financial constraints, M&As facilitate technology adoption and automation, disproportionately increasing the productivity of high-skill workers and enabling the displacement of occupations involved in routine-tasks, typically mid-income occupations. An M&A event is associated with a 4.2% reduction in establishment routine share intensity and a 3.3% increase in the share of high skill workers at the target as compared to a matched sample of control establishments. These results have important implications on wage inequality: Following an M&A, we observe 9.2% higher hourly wages for the remaining workers in the establishment and an increase in wage polarization as measured by the 90/10 ratio. Our results are generalized at the macro level as we are able to replicate similar patterns industry-wide.
Keywords: mergers, technological change, inequality
JEL Classification: G34, J2, J21, J31, D31
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