We hand-collect and standardize information describing all 3,055 antitrust law suits brought by the Department of Justice (DOJ) between 1971 and 2018. Using restricted establishment-level microdata from the U.S. Census, we compare the economic outcomes of a non-tradable industry in states targeted by DOJ antitrust lawsuits to outcomes of the same industry in other states that were not targeted. We document that DOJ antitrust enforcement actions permanently increase employment by 5.4% and business formation by 4.1%. Using an event-study design, we find (1) a sharp increase in payroll that exceeds the increase in employment, meaning that DOJ antitrust enforcement increases average wages, (2) an economically smaller increase in sales that is statistically insignificant, and (3) a precise increase in the labor share. While we cannot separately measure the quantity and price of output, the increase in production inputs (employment), together with a proportionally smaller increase in sales, strongly suggests that these DOJ antitrust enforcement actions increase the quantity of output and simultaneously decrease the price of output. Our results show that government antitrust enforcement leads to persistently higher levels of economic activity in targeted industries.
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THE IMPACT OF STATE URBAN ENTERPRISE ZONES ON BUSINESS OUTCOMES*
December 1998
Working Paper Number:
CES-98-20
Since the early 1980s, a vast majority of states have implemented enterprise zones. This paper examines the impact of zone programs in the urban areas of six states on business outcomes, the main target of zone incentives. The primary source of outcome data is the U.S. Bureau of Census' Longitudinal Research Database (LRD), which tracks manufacturing establishments over time. Matched sample and geographic comparison groups are created to measure of the impact of zone policy on employment, establishment, shipment, payroll, and capital spending outcomes. Consistent with previous research findings, the difference in difference estimates indicate that zones appears to have little impact on average. However, by exploiting the establishment-level data, the paper finds that zones have a positive impact on the outcomes of new establishments and a negative impact on the outcomes of previously existing establishments.
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Shareholder Power and the Decline of Labor
May 2022
Working Paper Number:
CES-22-17
Shareholder power in the US grew over recent decades due to a steep rise in concentrated
institutional ownership. Using establishment-level data from the US Census Bureau's Longitudinal Business Database for 1982-2015, this paper examines the impact of increases in concentrated institutional ownership on employment, wages, shareholder returns, and labor productivity. Consistent with theory of the firm based on conflicts of interests between shareholders and stakeholders, we find that establishments of firms that experience an increase in ownership by larger and more concentrated institutional shareholders have lower employment and wages. This result holds in both panel regressions with establishment fixed effects and a difference-in-differences design that exploits large increases in concentrated institutional ownership, and is robust to controls for industry and local shocks. The result is more pronounced in industries where labor is relatively less unionized, in more monopsonistic local labor markets, and for dedicated and activist institutional shareholders. The labor losses are accompanied by higher shareholder returns but no improvements in labor productivity, suggesting that shareholder power mainly reallocates rents away from workers. Our results imply that the rise in concentrated institutional ownership could explain about a quarter of the secular decline in the aggregate labor share.
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How Big is Small? The Economic Effects of Access to Small Business Subsidies
June 2024
Working Paper Number:
CES-24-28
Industry size standards that determine eligibility for small business subsidies have vastly increased
over the past decade. We exploit quasi-random variation in the implementation of size standard
increases to study the effects on small firms, subsidy allocation, and industry outcomes using
Census Bureau microdata. Following size standard increases, revenues decline for an industry's
smallest firms, and they are less likely to survive. We link these effects to a reallocation of
government procurement contracts from smaller to larger firms. Consequently, industries become
more concentrated and growth declines. These findings highlight the broad economic effects of
changing eligibility for small business subsidies.
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Cementing Relationships: Vertical Integration, Foreclosure, Productivity, and Prices
July 2006
Working Paper Number:
CES-06-21
This paper looks at the reasons for and results of vertical integration, with specific regard to its possible effects on market power as proposed in the theoretical literature on foreclosure. It uses a rich data set on producers in the cement and ready-mixed concrete industries over a 34- year period to perform a detailed case study. There is little evidence that foreclosure effects are quantitatively important in these industries. Instead, prices fall, quantities rise, and entry rates remain unchanged when markets become more integrated. We suggest an alternative mechanism that is consistent with these patterns and provide additional evidence in support of it: namely, that higher productivity producers are more likely to vertically integrate, and as has been documented elsewhere, are also larger, more likely to grow and survive, and charge lower prices. We explore possible sources of vertically integrated producers' productivity advantage and find that the advantage is tied to firm size, possibly in part through improved logistics coordination, but not to several other possible explanations.
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Personal Bankruptcy Law and Entrepreneurship
January 2017
Working Paper Number:
CES-17-42R
We study the effect of debtor protection on firm entry and exit dynamics. We find that more lenient personal bankruptcy laws lead to higher firm entry, especially in sectors with low entry barriers. We also find that debtor protection increases firm exit rates and that this effect is independent of firm age. Our results overall indicate that changes in debtor protection affect firm dynamics.
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Upstream, Downstream: Diffusion and Impacts of the Universal Product Code
January 2017
Working Paper Number:
CES-17-66R
We study the adoption, diffusion, and impacts of the Universal Product Code (UPC) between 1975 and 1992, during the initial years of the barcode system. We find evidence of network effects in the diffusion process. Matched-sample difference-in-difference estimates show that firm size and trademark registrations increase following UPC adoption by manufacturers. Industry-level import penetration also increases with domestic UPC adoption. Our findings suggest that barcodes, scanning, and related technologies helped stimulate variety-enhancing product innovation and encourage the growth of international retail supply chains.
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Criminal court fees, earnings, and expenditures: A multi-state RD analysis of survey and administrative data
February 2023
Working Paper Number:
CES-23-06
Millions of people in the United States face fines and fees in the criminal court system each year, totaling over $27 billion in overall criminal debt to-date. In this study, we leverage five distinct natural experiments in Florida, Michigan, North Carolina, Texas, and Wisconsin using regression discontinuity designs to evaluate the causal impact of such financial sanctions and user fees. We consider a range of long-term outcomes including employment, recidivism, household expenditures, and other self-reported measures of well-being, which we measure through a combination of administrative records on earnings and employment, the Criminal Justice Administrative Records System, and household surveys. We find consistent evidence across the range of natural experiments and subgroup analyses of precise null effects on the population, ruling out long-run impacts larger than +/-3.6% on total earnings and +/-4.7% on total recidivism. Failure to find changes in outcomes undermines popular narratives of poverty traps arising from criminal debt but argues against the use of fines and fees as a source of local revenue and as a crime control tool.
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Entry, Exit, and the Determinants of Market Structure
September 2009
Working Paper Number:
CES-09-23
Market structure is determined by the entry and exit decisions of individual producers. These decisions are driven by expectations of future profits which, in turn, depend on the nature of competition within the market. In this paper we estimate a dynamic, structural model of entry and exit in an oligopolistic industry and use it to quantify the determinants of market structure and long-run firm values for two U.S. service industries, dentists and chiropractors. We find that entry costs faced by potential entrants, fixed costs faced by incumbent producers, and the toughness of short-run price competition are all important determinants of long run firm values and market structure. As the number of firms in the market increases, the value of continuing in the market and the value of entering the market both decline, the probability of exit rises, and the probability of entry declines. The magnitude of these effects differ substantially across markets due to differences in exogenous cost and demand factors and across the dentist and chiropractor industries. Simulations using the estimated model for the dentist industry show that pressure from both potential entrants and incumbent firms discipline long-run profits. We calculate that a seven percent reduction in the mean sunk entry cost would reduce a monopolist's long-run profits by the same amount as if the firm operated in a duopoly.
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Are All Trade Protection Policies Created Equal? Empirical Evidence for Nonequivalent Market Power Effects of Tariffs and Quotas
September 2010
Working Paper Number:
CES-10-27
The steel industry has been protected by a wide variety of trade policies, both tariff- and quota-based, over the past decades. This extensive heterogeneity in trade protection provides the opportunity to examine the well-established theoretical literature predicting nonequivalent effects of tariffs and quotas on domestic firms' market power. Robust to a variety of empirical specifications with U.S. Census data on the population of U.S. steel plants from 1967-2002, we find evidence for significant market power effects for binding quota-based protection, but not for tariff-based protection. There is only weak evidence that antidumping protection increases market power.
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When Do Firms Shift Production Across States to Avoid Environmental Regulation?
December 2001
Working Paper Number:
CES-01-18
This paper examines whether a firm's allocation of production across its plants responds to the environmental regulation faced by those plants, as measured by differences in stringency across states. We also test whether sensitivity to regulation differs based on differences across firms in compliance behavior and/or differences across states in industry importance and concentration. We use Census data for the paper and oil industries to measure the share of each state in each firm's production during the 1967-1992 period. We use several measures of state environmental stringency and test for interactions between regulatory stringency and three factors: the firm's overall compliance rate, a Herfindahl index of industry concentration in the state, and the industry's share in the state economy. We find significant results for the paper industry: firms allocate smaller production shares to states with stricter regulations. This impact is concentrated among firms with low compliance rates, suggesting that low compliance rates are due to high compliance costs, not low compliance benefits. The interactions between stringency and industry characteristics are less often significant, but suggest that the paper industry is more affected by regulation where it is larger or more concentrated. Our results are weaker for the oil industry, reflecting either less opportunity to shift production across states or a greater impact of environmental regulation on paper mills.
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