The Relationship between Efficiencies Defenses for Mergers and TFP Growth

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Abstract

This article investigates whether efficiencies defenses in merger control lead to greater economic efficiency, specifically by examining their impact on national total factor productivity (TFP) growth. Efficiencies defenses are provisions in competition law that allow efficiencies from mergers to be weighed against potential harms. While increasingly common—present in 40.4 per cent of countries by 2010—their effectiveness remains underexplored. To address this gap, the study adapts the econometric model from Buccirossi et al. (2013), using data from the Penn World Tables version 10.01 and the Comparative Competition Law Dataset (Bradford et al., 2018). The analysis estimates the causal relationship between the introduction of efficiencies defenses and TFP growth. The results yield two key findings. First, introducing efficiencies defenses is generally associated with higher TFP growth, suggesting they may enhance economic performance. However, the effectiveness likely varies by the design and implementation of these provisions—an area for future research. Second, these legal reforms often coincide with increased enforcement resources. While efficiencies defenses appear to contribute to productivity gains, their impact depends heavily on the capacity of enforcement agencies. Without sufficient resources, even well-designed competition laws are unlikely to produce meaningful results.

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