Trade liberalization and industrial restructuring through mergers and acquisitions |
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| Affiliation: | 1. Université Libre de Bruxelles (ECARES), Belgium;2. CEPR, United Kingdom;3. Lancaster University Management School, United Kingdom;1. UNCTAD, Switzerland;2. University of Geneva, Switzerland;3. CEPR, United Kingdom;4. Universidad Nacional de La Plata, Calle 6 e/47 y 48, 1900 La Plata, Argentina;1. Board of Governors of the Federal Reserve System, 20th & C Streets NW, Washington, DC 20551, United States;2. Yale School of Management & NBER, 165 Whitney Avenue, New Haven, CT 06511, United States |
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| Abstract: | This paper analyzes mergers and acquisitions (M&As) as a channel of industrial restructuring after trade liberalization. Using the Canada–United States Free Trade Agreement (CUSFTA) of 1989 as a source of exogenous variation in trade barriers, I show that trade liberalization increased domestic Canadian M&A activity (Canadian firms buying other Canadian firms) by over 70%. There is no robust link between tariff reductions and either domestic U.S. or cross-border M&As. I also provide evidence that domestic M&As transferred resources from less to more productive firms and that the magnitude of the overall transfer was quantitatively important. |
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