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INFORMATION TO USERS This manuscript has been reproduced from the microfilm master. UMI films the text directly from the original or copy submitted. Thus, some thesis and dissertation copies are in typewriter face, while others may be from any type of computer printer. The quality of this reproduction is dependent upon the quality of the copy submitted.Broken or indistinct print, colored or poor quality illustrations and photographs, print bleedthrough, substandard margins, and improper alignment can adversely affect reproduction. In the unlikely event that the author did not send UMI a complete manuscript and there are missing pages, these will be noted. Also, if unauthorized copyright material had to be removed, a note will indicate the deletion. Oversize materials (e.g., maps, drawings, charts) are reproduced by sectioning the original, beginning at the upper left-hand comer and continuing from left to right in equal sections with small overlaps. ProQuest Information and Learning 300 North Zeeb Road, Ann Arbor, Ml 48106-1346 USA 800-521-0600 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with with permission permission of the of copyright the copyright owner. owner.Further Further reproduction reproduction prohibited withoutprohibited permission. without permission. AN INQUIRY INTO THE POSSIBLE TRADEOFFS BETWEEN ANTITRUST ENFORCEMENT AND EMPLOYMENT bv Van H. Pho submitted to the Faculty of the College of Arts and Sciences of American University in partial fulfillment of the requirements for the degree of Doctor o f Philosophy in Economics Robert Lerman Agapf Somwaru Dean of the College Date 2002 American University Washington D.C. 20016 AMERICAN UNIVERSITY LIBRARY Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. UMI Number: 3069097 ___ ® UMI UMI Microform 3069097 Copyright 2003 by ProQuest Information and Learning Company. All rights reserved. This microform edition is protected against unauthorized copying under Title 17, United States Code. ProQuest Information and Learning Company 300 North Zeeb Road P.O. Box 1346 Ann Arbor, Ml 48106-1346 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ACKNOWLEDGEMENTS To my parents, Daniel and Hong, who have sacrificed so much. Special thanks to my family and friends for their unending support, encouragement, and understanding of what it means to be on a graduate student budget. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. AN INQUIRY INTO THE POSSIBLE TRADEOFFS BETWEEN ANTITRUST ENFORCEMENT AND EMPLOYMENT BY Yvon H. Pho ABSTRACT This research investigates the impact of U.S. federal antitrust enforcement on employment opportunities and wages for U.S. manufacturing workers from 1979- 1999. This study is conducted on two levels. First, a case study approach is used to determine direct and deterrent effects from antitrust indictments on economic activities for six firms. Second, panel data analysis is employed to examine antitrust enforcement effects on industry employment (2-digit SIC code level) and w'ages for seven occupation groups. Antitrust law enforcement potentially can result in wage and job losses if generally efficient business practices are disrupted. While the aim of antitrust is not to attack efficiency, antitrust indictments may lead to negative labor market effects. A theory-based relationship between employment and antitrust enforcement is developed. Then, a panel dataset was created from the Trade Regulation Reporter, Annual Survey of Manufactures, Current Population Survey, and National Income and Product Accounts. Ten models are estimated using GLS procedures to control for nonspherical disturbances in the data. iii Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. The resounding theme from these analyses is that antitrust enforcement does affect the labor market. A pattern emerging from the case studies is an immediate rise and subsequent decline in competitor employment once the antitrust indictment is issued. Corresponding with the results from the industry analysis, this could be an outcome of the competing firm maneuvering to improve its market position and competitiveness. The studies also provided evidence of lagged adverse employment effects occurring during and at the conclusion of the antitrust case. The industry analyses indicate that antitrust enforcement generally benefits employment. Employment increases persist two years beyond the initial indictment. However, the rate of increase does not. In most cases, employment growth surges one year after the indictment, but tapers off considerably. Additionally, high-wage workers who tend to possess specific human capital benefit the most from antitrust enforcement in terms of quantity and price, whereas low-wage workers who embody general human capital benefit the least. In summary, firms respond to antitrust enforcement in ways that ultimately affect both labor quantity and price. This dissertation provides evidence of employment and wage consequences derived from government intervention in the marketplace. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. TABLE OF CONTENTS ACKNOWLEDGEMENTS...............................................................................................................ii ABSTRACT.........................................................................................................................................iii LIST OF TABLES........................................................................................................................... viii LIST OF FIGURES........................................................................................................................... ix Chapter 1. GOALS AND OBJECTIVES......................................................................................... 1 Background The Antitrust Laws and Its Enforcers Literature Review Methodology 2. EMPIRICAL ANALYSIS............................................................................................ 25 Level 1: Firm analysis Level 2: Industry analysis Extensions to the core models Industry concentration Worker categories Major industry group 3. EMPIRICAL RESULTS FROM FIRM ANALYSES............................................ 43 Case Study 1: The Stanley Works and Black & Decker The Stanley Works, Incorporated V Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Case Study 2: Archer-Daniels-Midland and ConAgra Archer-Daniels-Midland Company ConAgra Foods, Incorporated Case Study 3: Merck and Schering-Plough Merck & Co, Incorporated Schering-Plough Corporation Summary of Case Studies 4. DATA AND ECONOMETRIC ISSUES.................................................................102 Trade Regulation Reporter Annual Survey of Manufactures (ASM) and Economic Census Current Population Survey (CPS) National Income and Product Accounts Limitations 5. EMPIRICAL RESULTS FROM INDUSTRY ANALYSES............................. 121 Analysis of effects on employment levels Model 1: Analysis of employment levels - Core model Model 2: Analysis of employment levels, including industry concentration interaction effect Model 3: Analysis of employment levels, including worker category interaction effects Model 4: Analysis of employment levels, including major industry group interaction effects Model 5: Analysis of employment levels, including both worker category and major industry group interaction effects Analysis of effects on average wages vi Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Model 6: Analysis of average wages - core model (natural log specifications) Model 7: Analysis of average wages, including industry concentration interaction effect Model 8: Analysis of average wages, including worker category interaction effects Model 9: Analysis of average wages, including industry interaction effects Model 10: Analysis of average wages, including both worker category and major industry group interaction effects 6. CONCLUSION 143 APPENDICES 151 WORKS CITED 296 VII Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. LIST OF TABLES Table Page 1. Summary of employment models .........................................................................................41 2. Summary of average wage models .......................................................................................42 3. Summary of The Stanley Works business activity ...........................................................48 4. Summary of Black & Decker business activity .................................................................57 5. Summary of Archer-Daniels-Midland business activity .................................................64 6. Summary of ConAgra business activity ............................................................................. 74 7. Summary of Schering-Plough business activity ............................................................... 90 8. Descriptive statistics for antitrust lawsuit outcomes for the years 1979 through June 2001 (N = 532) .......................................................................................103 9. Descriptive statistics for employment analysis .............................................................110