Trade liberalization and industrial restructuring through mergers and acquisitions
By: Holger Breinlich
Contributors: London School of Economics and Political Science. Centre for Economic Performance
Series: CEP discussion paper -- no. 717; Discussion paper (London School of Economics and Political Science. Centre for Economic Performance : Online) -- no. 717.
Publisher: Centre for Economic Performance, London School of Economics and Political Science
Published: 2006
Place of publication: London
Language: eng
Format: [electronic resource] /
Description: 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.
Notes: Title from PDF file (viewed on Mar. 29, 2006).

"March 2006."

Includes bibliographical references.

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