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Cross-border mergers as instruments of comparative advantage

Abstract:

A two-country model of oligopoly in general equilibrium is used to show how changes in market structure accompany the process of trade and capital-market liberalization. The model predicts that bilateral mergers in which low-cost firms buy out higher-cost foreign rivals are profitable under Cournot competition. As a result, trade liberalization can trigger international merger waves, in the process encouraging countries to specialize and trade more in accordance with comparative advantage. Wi...

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Publication status:
Published
Peer review status:
Peer reviewed

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Institution:
"University of Oxford", "CEPR"
Research group:
Industrial Economics
Oxford college:
Merton College
Department:
Social Sciences Division - Economics
Role:
Author
Publisher:
Blackwell Publishing Publisher's website
Journal:
Review of Economic Studies Journal website
Volume:
74
Issue:
4
Pages:
1229-1257
Publication date:
2007-10-05
DOI:
EISSN:
1467-937X
ISSN:
0034-6527
URN:
uuid:4648f49c-0679-40b8-aeb3-88c50ffbb185
Local pid:
ora:2108

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