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Mergers as Reallocation


  • Boyan Jovanovic

    (New York University)

  • Peter L. Rousseau

    (Vanderbilt University)


We model merger waves as reallocation waves, and argue that mergers spread new technology in a way that is similar to that of the entry and exit of firms. We focus on two periods: 1890-1930, during which electricity and the internal combustion engine spread through the U.S. economy, and 1970-2000-the Information Age. As the model implies, reallocation did rise during both epochs. The model also implies that exits should lead mergers during a transition, but this seems to have happened more emphatically in the electrification epoch. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Boyan Jovanovic & Peter L. Rousseau, 2008. "Mergers as Reallocation," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 765-776, November.
  • Handle: RePEc:tpr:restat:v:90:y:2008:i:4:p:765-776

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    References listed on IDEAS

    1. Valerie A. Ramey & Matthew D. Shapiro, 2001. "Displaced Capital: A Study of Aerospace Plant Closings," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 958-992, October.
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    11. Andreas Hornstein & Per Krusell, 1996. "Can Technology Improvements Cause Productivity Slowdowns?," NBER Chapters,in: NBER Macroeconomics Annual 1996, Volume 11, pages 209-276 National Bureau of Economic Research, Inc.
    12. Bartel, Ann P & Sicherman, Nachum, 1998. "Technological Change and the Skill Acquisition of Young Workers," Journal of Labor Economics, University of Chicago Press, vol. 16(4), pages 718-755, October.
    13. Robert H. McGuckin & Sang V. Nguyen, 1995. "On Productivity and Plant Ownership Change: New Evidence from the Longitudinal Research Database," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 257-276, Summer.
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    15. Boyan Jovanovic & Peter L. Rousseau, 2002. "The Q-Theory of Mergers," American Economic Review, American Economic Association, vol. 92(2), pages 198-204, May.
    16. Boyan Jovanovic & Serguey Braguinsky, 2004. "Bidder Discounts and Target Premia in Takeovers," American Economic Review, American Economic Association, vol. 94(1), pages 46-56, March.
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    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior


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