Market power, antitrust, and US macroeconomic outcomes

• Department of Economics

This event features a discussion with Professor Morten Ravn (University College London).

We produce a narrative record of the universe of US federal antitrust indictments since the mid-1950’s. Focusing on indictments of publicly listed firms, we estimate the firm-level impact of indictments on firm valuations from daily excess returns on equity. We use these estimates to produce reduced-form estimates of the impact of antitrust on both sector-level and aggregate outcomes, and to produce causal estimates of changes in market power. We document a fundamental change in the focus of US federal antitrust around 1980. Before the 1980’s antitrust authorities often indicted publicly listed firms for civil non-merger and criminal violations of antitrust law, since then the focus has been entirely on civil merger related violations. Our estimates of the impact on firm valuations document significant declines in firm valuations after antitrust indictments. We uncover contrasting effects on the economy of civil non-merger and criminal cases and merger related cases: While prevention of both types of violati

Co-author: Brian Amorim Cabaco