These papers analyze the impact of changes in competitive market structure on an industry's total factor productivity (TFP) growth and profit rate growth. Horizontal mergers are of particular interest because merger participants routinely claim that they will result in welfare improving efficiency gains. If true, these gains should translate into increased TFP growth. The first chapter estimates this effect, along with others, after developing a model of TFP growth as a function of changes in the competitive market structure of an industry, changes in production diversification measured at the establishment level, and changes in output per establishment and the number of establishments. Mergers are found to have a positive impact upon TFP growth, accounting for over 0.34 percentage points of total factor productivity growth between census years.; Likewise, the impact of changes in the competitive market structure upon profit rates can be used to inform antitrust policy regarding the acquisition of market power through horizontal mergers. The second chapter decomposes the change in concentration into changes due to the exit of firms, the entrance of firms, mergers among competitors, and changes in market share of continuing firms. Model estimation determines that horizontal mergers in manufacturing industries from 1963 to 1992 increase the growth in the profit rate for industries where the average diversification of production is high. Conversely, horizontal mergers have no significant impact on the growth in the profit rate in industries where the average diversification of production is low. The births of new firms lead to slower growth of the profit rate across all industries, possibly due to increased competition and a reduced probability of the exercise of market power in the industry. The deaths of existing firms increase the growth in the profit rate across all industries, most likely due to the reduction in the number of competitors, which increases the probability of the exercise of market power, or that the poorest performing firms are the ones that exit, thereby increasing the average profit rate for the industry.
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