Using this new counterfactual in a triple difference, we estimate a positive effect of antitrust sanctions on industry sales and a negative effect on the operating profit margin. In industries with closed investigations, we find that sales are declining and the margin is rising relative to other industries in the same sector, so our estimates using the new counterfactual are larger than estimates using the prior approach, which assumes counterfactual trends are the same as industries in the same sector.<sup>1</sup> In addition to this novel identification approach, our paper measures industry performance using an economic census, which in Mexico enumerates every firm in the economy with a fixed location, including those that are small, informal, and privately held. These data enable us to quantify the aggregate effects of antitrust sanctions, and also illustrate the mechanisms behind these effects, informing current debates about how antitrust may or may not address an aggregate productivity slowdown in the United States and Europe that has coincided with a rise in markups. We estimate the effects of sanctions on industry total factor productivity (TFP), employing recent insights from Ackerberg, Caves and Frazer (2015) and De Loecker and Syverson (2021) to flexibly allow for different factor shares across industries, potential decreasing or increasing returns to scale, and imperfect competition. After antitrust sanctions, productivity increases for all firms in an industry. Aggregating this effect and accounting for the small share of output the Commission has resources to investigate each year, we attribute roughly half a percent (or 1/200) of the steady state per capita gross domestic product growth to antitrust sanctions.

The mechanisms behind this effect are very interesting. De Loecker et al. (2020) document that two-thirds of the growth in markups in the United States is due to the reallocation of sales towards high markup firms. If lax antitrust enforcement is responsible for rising markups in the United States, one might expect that antitrust enforcement would cause a reallocation of sales across firms. In Mexico, this is not what we find. Increases in productivity after sanction are fairly homogeneous across cases, and measures of factor misallocation like the correlation of market share and productivity (Olley and Pakes, 1996) or the variance of productivity (Hsieh and Klenow, 2009), which have been suggested as an explanation for low productivity in Mexico and other middle-income economies, do not change on average. Though merger control<sup>2</sup> could conceivably have different effects, these results suggest pros-

> 1The estimation involves two steps. First, we use the synthetic difference-in-differences (SDID) approach proposed by Arkhangelsky, Athey, Hirshberg, Imbens and Wager (2021) to quantify the change in outcomes in relevant markets after the Commission’s decision to either close a case or sanction agents for illegal conduct within a three-digit sector. Second, we regress the SDID effects of all cases on a constant and a dummy for whether the case ended in a sanction, allowing in some specifications for potential heterogeneity in treatment effects, as recommended in the context of antitrust by Vita and Osinski (2016). The coefficient on the dummy can be interpreted as a triple difference, illustrating the effects of sanctions relative to the counterfactual of a closed case.

> 2Merger control is the other major activity of antitrust enforcement agencies in addition to investigating

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