Trade Liberalization and Industrial Restructuring through M&A

Today, I had the pleasure of hearing Holger Breinlich present his most recent work, which introduces new evidence about the reactions of heterogeneous firms to trade liberalization:

This paper analyzes mergers and acquisitions (M&A) as a previously neglected channel of industrial restructuring in the face of trade liberalization. Using the Canada-United States Free Trade Agreement of 1989 as a source of exogenous variation in trade barriers, I show that trade liberalization leads to a significant increase in M&A activity. I also provide evidence that resources are transferred from less to more productive firms in the process and that the magnitude of the overall transfer is quantitatively important. Taken together, these results suggest that M&As are an important alternative to the previously studied adjustment channels of firm and establishment closure and contraction.

Full paper here (pdf).