A Retrospective Analysis of the Acquisition of Target's Pharmacy Business by CVS Health: Labor Market Perspective

Abstract

We analyze the labor market impact of CVS Health's acquisition of Target's pharmacy business in December 2015, using Lightcast job posting data. Employing difference-in-differences and event study specifications with treatment assigned by geography, we find that the acquisition reduced pay in affected labor markets by 4% in our preferred specification. We test for heterogeneous merger effects by treatment intensity and by occupational characteristics. Commuting zones where both CVS and Target had significant presence pre-merger experience worse pay outcomes following the merger. Further, occupations with lower pay, lower outward mobility, and whose outside job options were impacted the most by the merger exhibit more pronounced negative effects on pay.

Keywords: Labor market monopsony, merger retrospective analysis, difference-in-differences regression, retail pharmacy

JEL Classification: G34, I11, J24, J31, J42, R32