P.S. My surname is pronounced me-loss-ahv-yeStrictly speaking, instead of 'ye' it should be a 'ʎe' where 'ʎ' sounds like the 'll' in 'million'.-vich. Calling me by Milos is fine too.
Research
Working Papers
Mergers and Acquisitions: Market Power or Efficiency? (JMP) [paper]
Abstract
Mergers and acquisitions (M&A) can cause large changes to industry concentration and firm productivity. I develop a general equilibrium model of imperfect competition where firms can merge with other firms to analyze the impact of M&A on industry structure, firm productivity, and aggregate outcomes. Industry consolidation is modeled through a centralized matching process that generates rich predictions about who merges with whom. I detail cases of the model that admit analytically tractable solutions and characterize the matching patterns that determine the extent of synergies, as well as the aggregate level and dispersion of markups that can be attributed to M&A. The level of concentration, as well as aggregate patterns of merger pairings, support the view that mergers drive higher market power and, on average, do not result in large productivity-enhancing synergies. Despite this, counterfactual analysis shows that mergers tend to increase aggregate productivity, as they reduce misallocation by lowering the overall dispersion of markups but decrease output and welfare through a higher aggregate markup. I estimate that mergers increase aggregate productivity by 1.63% yet decrease output by 3.9%.
Presented at: OzMac, MEA, Midwest Macro (Spring), Society of Economic
Dynamics (SED), WashU Economics Graduate Student Conference (EGSC), Iowa State reading group.
Learning from Multinationals (with Minyoung Song) [paper]
Abstract
Multinational firms account for a large share of global trade and production and have significant impact on productivity growth across countries. We develop a tractable model of international trade and multinational production (MP) to analyze their effects on productivity growth through knowledge diffusion across countries. We connect the theory to evidence by examining the impact of a 2005—2006 Chinese liberalization of outward investment on the productivity growth of its counterparts. Using an instrumental variable approach, we find a 1 percentage point increase in MP share from China resulted in a 1.85% increase in productivity. Mapping the reduced-form estimates to the rate of idea diffusion from foreign firms, we provide evidence on key parameters used in knowledge diffusion models. While long run productivity growth is primarily driven by domestic firms, MP can have a sizable impact on productivity growth, particularly when productivity differences between multinational and domestic firms are large. Increases in bilateral trade costs shift firm activity away from exporting to producing abroad, leading to productivity increases in the multinational's production destination at the expense of the exporting nation. We quantify the impacts of Chinese liberalization of trade, as well as inward and outward MP, on the productivity growth of 59 countries.
Presented at: Sydney University Macroeconomic Reading Group Workshop, WashU Economics Graduate Student Conference (EGSC), North American Summer Meetings (NASM) of the Econometric Society, Midwest Trade, Midwest Macro (Fall), Western Economic Association International (WEAI), University of Queensland.
