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Does State Antitrust Enforcement Drive Establishment Exit?

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

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 firm-level 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. JEL classification:

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  • Robert M. Feinberg & Thomas A. Husted & Florian Szucs, 2013. "Does State Antitrust Enforcement Drive Establishment Exit?," Working Papers 2013-13, American University, Department of Economics.
    • Handle: RePEc:amu:wpaper:2013-13
    DOI: 10.17606/g8a3-ye92
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    References listed on IDEAS

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    1. Wagner, Joachim, 1994. "The Post-entry Performance of New Small Firms in German Manufacturing Industries," Journal of Industrial Economics, Wiley Blackwell, vol. 42(2), pages 141-154, June.
    2. Robert Feinberg, 2010. "Do international shocks affect small wholesalers and retailers?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 146(2), pages 323-338, June.
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    Cited by:

    1. Lawrence J. White, 2020. "Antitrust Economics And Consumer Protection Economics In Policy And Litigation: Why The Disparity?," Economic Inquiry, Western Economic Association International, vol. 58(4), pages 1555-1564, October.

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    More about this item

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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