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Trade liberalization and industrial restructuring through mergers and acquisitions

Breinlich, Holger (2006) Trade liberalization and industrial restructuring through mergers and acquisitions. CEPDP, 717. Centre for Economic Performance, London School of Economics and Political Science, London, UK. ISBN 0753019434

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Abstract

This paper analyzes mergers and acquisitions (M&A) as a previously neglected channel of industrial restructuring in the face of trade liberalization. Using the Canada-United States Free Trade Agreement of 1989 as a natural experiment, I show that trade liberalization leads to a significant increase in M&A activity. I also provide evidence that resources are transferred from less to more productive firms in the process and that the magnitude of the overall transfer is quantitatively important. Taken together, these results suggest that M&A is an important alternative to the previously studied adjustment channels of firm and establishment closure and contraction. This has strong implications for the design of competition policy in the wake of trade liberalizations since M&A may offer a more efficient way of transferring resources than contraction and closure of low productivity firms combined with internal growth of more efficient firms.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk
Additional Information: © 2006 Holger Breinlich
Library of Congress subject classification: H Social Sciences > HF Commerce
Journal of Economic Literature Classification System: L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior
L - Industrial Organization > L4 - Antitrust Issues and Policies
F - International Economics > F1 - Trade > F15 - Economic Integration
F - International Economics > F1 - Trade > F12 - Models of Trade with Imperfect Competition and Scale Economies
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 717
Date Deposited: 23 Jul 2008 11:51
URL: http://eprints.lse.ac.uk/19868/

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