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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.

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File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/rest.90.4.765
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Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 90 (2008)
Issue (Month): 4 (November)
Pages: 765-776

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Handle: RePEc:tpr:restat:v:90:y:2008:i:4:p:765-776
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