Merger Guidelines for the Labor Market

63 Pages Posted: 20 Apr 2023

See all articles by David W. Berger

David W. Berger

Duke University, Fuqua School of Business-Economics Group

Thomas Hasenzagl

University of Minnesota

Kyle Herkenhoff

University of Minnesota - Minneapolis

Simon Mongey

University of Chicago

Eric A. Posner

University of Chicago - Law School

Multiple version iconThere are 2 versions of this paper

Date Written: April 18, 2023

Abstract

While the labor market implications of mergers have been historically ignored as “out of market” effects, 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 Classification: D40,E20,H0,J0,K0,LO

Suggested Citation

Berger, David W. and Hasenzagl, Thomas and Herkenhoff, Kyle and Mongey, Simon and Posner, Eric A., Merger Guidelines for the Labor Market (April 18, 2023). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2023-57, Available at SSRN: https://ssrn.com/abstract=4424045 or http://dx.doi.org/10.2139/ssrn.4424045

David W. Berger

Duke University, Fuqua School of Business-Economics Group ( email )

Box 90097
Durham, NC 27708-0097
United States

Thomas Hasenzagl

University of Minnesota ( email )

10 University Avenue
Duluth, MN 55810
United States

Kyle Herkenhoff

University of Minnesota - Minneapolis ( email )

110 Wulling Hall, 86 Pleasant St, S.E.
308 Harvard Street SE
Minneapolis, MN 55455
United States

Simon Mongey (Contact Author)

University of Chicago ( email )

Eric A. Posner

University of Chicago - Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States
773-702-0425 (Phone)
773-702-0730 (Fax)

HOME PAGE: http://www.law.uchicago.edu/faculty/posner-e/

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