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Wiley InterScience | ||
  Review of Economic StudiesVolume 74 Issue 4, Pages 1229 - 1257 Published Online: 5 Sep 2007 © 2010 The Review of Economic Studies Limited
Abstract | References | Full Text: HTML, PDF (Size: 400K) | Related Articles | Citation Tracking  Cross-Border Mergers as Instruments of Comparative Advantage Copyright 2007 The Review of Economic Studies Limited ABSTRACTA 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. With symmetric countries, welfare is likely to rise, though the distribution of income always shifts towards profits. First version received February 2005; final version accepted June 2007 (Eds.) |  |
