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Title:The trade and welfare effects of mergers in space PDF Logo
Authors:Egger, Hartmut
Egger, Peter
Issue Date:2008
Series/Report no.:CESifo working paper 2217
Abstract:This paper analyzes the consequences of cross-border mergers in a spatial framework, thereby distinguishing three channels of influence: a price increase due to the elimination of product market competition, an adjustment in plant location which reduces overall transportation cost expenditures, and a harmonization in production costs due to a technology transfer within the firm. The welfare analysis illustrates that larger countries are better off after the merger. By contrast, smaller countries may lose, if the pre-merger production cost differential across firms is negligible and/or a post-merger technology transfer across production sites is infeasible. Furthermore, the analysis provides novel insights into the trade pattern effects of a merger. In this respect, the main result of the paper is that an adjustment of plant location in space can reverse the direction of (net) trade flows.
Subjects:spatial competition
cross-border merger
trade pattern
welfare analysis
JEL:F12
F23
L10
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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