Economic Effect of Mergers and Acquisitions - 11/17/15
Two economists, Jason Furman and Peter Orszag, indicate that mergers and acquisitions may be hurting the U.S. economy. In many industries like airlines, telecom, health care, and even beer, mergers and acquisitions have expanded the market power of large corporations. According to the economists, this has hurt consumers in the form of higher prices and is likely exacerbating income inequality.
Industry consolidation may have contributed certain businesses earning super normal returns - approximately ten times as large as median returns. This has contributed to income inequality by increasing the incomes of executives and shareholders.
As indicated by the New York Times, separate research by two finance professors at the University of Southern California estimates that nearly a third of American industries were highly concentrated by twenty thirteen, up from a quarter of all industries in nineteen ninety six.
Several years ago, Whirlpool was allowed to acquire Maytag even though the two companies controlled three quarters of the market for certain home appliances. Verizon and AT&T command about seventy percent of all wireless phone subscribers today.