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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. Working Paper. Centre for Economic Performance, LSE, CEP Discussion Papers, dp0717.

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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 (Working Paper)
Uncontrolled Keywords: Mergers and Acquisitions; Trade Liberalization; International Trade; CUSFTA
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 03 Jul 2012 14:25
Last Modified: 03 Jul 2012 14:25
URI: http://repository.essex.ac.uk/id/eprint/2714

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