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Wednesday Seminar - Felix Morency-Lavoie

Date & Time:
November 28, 2018 | 3:30 pm - 4:30 pm
SS 423
Felix Morency-Lavoie

Industry consolidation under spatial-dynamic externalities

Evidence from Norwegian salmon aquaculture

This study uses unique plant-level micro data to investigate industrial consolidation and firms’ strategic behaviors in the presence of externalities. Coasian theory suggests that externalities may create incentives for firms to acquire assets negatively affecting their productivity in order to control or reduce the externality, but transaction costs hinder this phenomenon. Intra-industry externalities among similar firms, like parasitic outbreaks in Norwegian salmon aquaculture, allow us to test this theory empirically. Our identification strategy relies on current scientific understanding of patterns in the spread of parasites across locations to quantify the spatial externality between firms. Preliminary results suggest regional concentration induces firms to alter their behaviors in pest management and that acquisitions may be driven by incentives to internalize the externality. These findings highlight potential complementarities in industrial and environmental policies.

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