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Does State Antitrust Enforcement Drive Establishment Exit?

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  • Robert M. Feinberg
  • Thomas A. Husted
  • Florian Szücs

Abstract

Previous work has shown that state-level antitrust enforcement activity may have impacts on entry and relocation behavior by U.S. firms. Significant state-level antitrust activity may be an indicator of a perceived adverse business environment and it is found to deter establishment entry, particularly for larger firms in the retail and wholesale sectors. An obvious question is whether establishment exit is affected in a symmetric way, or whether sunk costs of market entry may lead to a smaller impact in terms of the exit decisions. We first combine US Census establishment exit panel data with data for 1998-2006 on US state-level antitrust activity and other measures of state-level business activities that may affect establishment exit. We also consider establishment exit across different broad industry types -- manufacturing, retail and wholesale -- and several firm size categories. Local business cycle factors seem to be the primary driver of exit, though there is some evidence of political and antitrust determinants as well. In another approach, we examine firmlevel exit decisions and the extent to which these respond to state antitrust enforcement, with some indication of antitrust enforcement effects here as well, especially in the wholesale and retail sectors.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.426984.de/dp1323.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1323.

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Length: 30 p.
Date of creation: 2013
Date of revision:
Handle: RePEc:diw:diwwpp:dp1323

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Keywords: antitrust enforcement; state level; firm exit;

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  1. Ricjard Kneller & Danny McGowan, . "Tax Policy and Firm Entry and Exit Dynamics: Evidence from OECD Countries," Discussion Papers 12/01, University of Nottingham, School of Economics.
  2. Dunne, T. & Roberts, M.J. & Samuelson, L., 1988. "Pattenrs Of Firm Entry And Exit In U.S. Manufacturing Industries," Papers 1-88-2, Pennsylvania State - Department of Economics.
  3. Robert M Feinberg, 2013. "International Competition and Small-Firm Exit in US Manufacturing," Eastern Economic Journal, Palgrave Macmillan, vol. 39(3), pages 402-414.
  4. Vinod Sutaria & Donald A. Hicks, 2004. "New firm formation: Dynamics and determinants," The Annals of Regional Science, Springer, vol. 38(2), pages 241-262, 06.
  5. David Audretsch, 1994. "Business Survival and the Decision to Exit," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 1(1), pages 125-137.
  6. Feinberg, Robert M, 1980. "Antitrust Enforcement and Subsequent Price Behavior," The Review of Economics and Statistics, MIT Press, vol. 62(4), pages 609-12, November.
  7. Barry T. Hirsch & David A. Macpherson, 2003. "Union Membership and Coverage Database from the Current Population Survey: Note," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 56(2), pages 349-354, January.
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