Evidence for the Effects of Mergers on Market Power and Efficiency

36 Pages Posted: 24 Oct 2016 Last revised: 1 Mar 2023

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

Board of Governors of the Federal Reserve System

Multiple version iconThere are 3 versions of this paper

Date Written: October 2016

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.

Suggested Citation

Blonigen, Bruce A. and Pierce, Justin R., Evidence for the Effects of Mergers on Market Power and Efficiency (October 2016). NBER Working Paper No. w22750, Available at SSRN: https://ssrn.com/abstract=2858060

Bruce A. Blonigen (Contact Author)

University of Oregon - Department of Economics ( email )

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Justin R. Pierce

Board of Governors of the Federal Reserve System ( email )

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