Merger guidelines for the labor market

What are the welfare, wage, and output implications of applying merger review guidelines to the labor market? To answer this question, we develop a theory of multi-plant ownership and labor market monopsony. We estimate the model using U.S. Census data and demonstrate the model's ability to replicate empirically documented paths of employment and wages following mergers. We then simulate a representative set of U.S. mergers in order to evaluate merger review thresholds. Assuming mergers generate efficiency gains of 5 percent, our simulations yield welfare losses under the enforcement of the more lenient 2010 merger guidelines and welfare gains under enforcement of the more stringent 2023 and 1982 merger guidelines. Lastly, we estimate the aggregate effects of allowed mergers on output and labor's share of income under each set of merger guidelines.