Evidence for the Effects of Mergers on Market Power and Efficiency

36 Pages Posted: 17 Oct 2016

See all articles by Bruce A. Blonigen

Bruce A. Blonigen

University of Oregon - Department of Economics; National Bureau of Economic Research (NBER)

Justin R. Pierce

Federal Reserve Board

Multiple version iconThere are 3 versions of this paper

Date Written: 2016-10

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

JEL Classification: D24, G34, L41

Suggested Citation

Blonigen, Bruce A. and Pierce, Justin R., Evidence for the Effects of Mergers on Market Power and Efficiency (2016-10). FEDS Working Paper No. 2016-082. Available at SSRN: https://ssrn.com/abstract=2852716 or http://dx.doi.org/10.17016/FEDS.2016.082

Bruce A. Blonigen (Contact Author)

University of Oregon - Department of Economics ( email )

1285 University of Oregon
Eugene, OR 97403
United States
541-346-4680 (Phone)
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National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Justin R. Pierce

Federal Reserve Board ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

HOME PAGE: http://www.justinrpierce.com/

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