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The Dynamic Effects of Antitrust Policy on Growth and Welfare

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  • Cavenaile, Laurent
  • Celik, Murat Alp
  • Tian, Xu

Abstract

To study the dynamic effects of antitrust policy on growth and welfare, we develop and estimate the first general equilibrium model with Schumpeterian innovation, oligopolistic product market competition, and endogenous M&A decisions. The estimated model reveals that: (1) Existing policies generate gains in growth and welfare. (2) Strengthening antitrust enforcement could deliver substantially higher gains. (3) The dynamic long-run effects of antitrust policy on social welfare are an order of magnitude larger than the static gains from higher allocative efficiency in production. (4) Current HHI-based antitrust rules leave the majority of anticompetitive acquisitions undetected, highlighting the need for alternative guidelines.

Suggested Citation

  • Cavenaile, Laurent & Celik, Murat Alp & Tian, Xu, 2021. "The Dynamic Effects of Antitrust Policy on Growth and Welfare," Journal of Monetary Economics, Elsevier, vol. 121(C), pages 42-59.
    • Handle: RePEc:eee:moneco:v:121:y:2021:i:c:p:42-59
    DOI: 10.1016/j.jmoneco.2021.04.011
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    Cited by:

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    2. Yi, Fang & Cao, Chenru & Xu, Jingxuan, 2024. "How antitrust enforcement affects corporate ESG performance? Evidence from merger review cases in China," Economic Analysis and Policy, Elsevier, vol. 84(C), pages 1730-1746.
    3. Duong, Huu Nhan & Goyal, Abhinav & Zolotoy, Leon, 2024. "Anti-collusion leniency legislations and IPO activity: Worldwide evidence," Journal of Corporate Finance, Elsevier, vol. 89(C).
    4. Zhao, Yiyun, 2023. "Does the Antimonopoly Law improve companies’ cash-holding management efficiency? Empirical evidence from Chinese listed companies," Finance Research Letters, Elsevier, vol. 55(PB).
    5. Fons-Rosen, Christian & Roldan-Blanco, Pau & Schmitz, Tom, 2022. "The Effects of Startup Acquisitions on Innovation and Economic Growth," CEPR Discussion Papers 17752, C.E.P.R. Discussion Papers.
    6. Baslandze, Salomé, 2021. "Barriers to Creative Destruction: Large Firms and Non-Productive Strategies," CEPR Discussion Papers 16570, C.E.P.R. Discussion Papers.
    7. Berger, David & Hasenzagl, Thomas & Herkenhoff, Kyle & Mongey, Simon & Posner, Eric A., 2025. "Merger guidelines for the labor market," Journal of Monetary Economics, Elsevier, vol. 153(C).
    8. Yassine Lefouili & Leonardo Madio, 2025. "Mergers and Investments: Where Do We Stand?," Working Papers hal-05129593, HAL.
    9. Cheng, Rui & Li, Jing & Wu, Ting, 2024. "Competition policy and labor income share: Evidence from the antitrust policy in China," Economic Analysis and Policy, Elsevier, vol. 83(C), pages 966-977.
    10. Sampi, James & Vostroknutova, Ekaterina, 2025. "Antitrust Enforcement and Firm Performance : Evidence from Colombia’s Sugar Market," Policy Research Working Paper Series 11155, The World Bank.
    11. Jackie M.L. Chan & C. K. Woo, 2025. "Mergers, Firm Size, and Volatility in a Granular Economy," Post-Print hal-04719146, HAL.

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