Monday, December 19, 2011
Posted by D. Daniel Sokol
Vivek Ghosal's (Georgia Tech) excellent article REGIME SHIFT IN ANTITRUST LAWS, ECONOMICS, AND ENFORCEMENT is finally out. Highly recommended.
ABSTRACT: This article empirically models the longer-run, deep-seated shift in intellectual thinking that followed the Chicago School's criticism of the older antitrust doctrine and the shorter-run driving forces related to switches of the political party in power, merger waves, changes in economic activity, and the level of funding for the Antitrust Division, and quantifies their impact on enforcement by the Antitrust Division of the U.S. Department of Justice over the period from 1958 to 2002. The key findings are: (1) a distinct regime shift in antitrust enforcement during the 1970s and, post-regime shift, there has been a marked compositional change with a quantitatively large increase (decrease) in criminal (civil) antitrust court cases initiated; (2) post-regime shift, there appears to be a change in the role played by politics with Republicans initiating more (less) criminal (civil) court cases than Democrats, and the estimated quantitative effects are large; (3) disaggregating the total number of court cases into the main categories under which they are initiated (price-fixing, mergers, monopolization, and restraints-of-trade) shows that individual types of cases have widely differing responses to changes in the driving forces; and (4) in a horserace between the regime-shift and political effects on one side and the remaining variables on the other, the former forces win hands-down in explaining broad shifts in enforcement. Modeling the longer-run shift and disaggregating the court cases emerge as crucial to gaining insights into the intertemporal shifts in enforcement. The article elaborates on the causes for the shift in enforcement and on the effectiveness of antitrust.