Mergers, Foreign Competition, and Jobs: Evidence from the US Appliance Industry

Abstract

Policy choices often create trade-offs between workers and consumers. I examine how foreign competition alters the consumer welfare and domestic employment effects of mergers. I construct a model incorporating consumer demand, endogenous product portfolios, and employment decisions. Applying the model to Whirlpool's acquisition of Maytag in the appliance industry, I compare the observed merger to a counterfactual acquisition by a foreign buyer. Although Whirlpool's acquisition decreased consumer welfare by $271 million annually, it preserved 797 domestic jobs. These jobs must therefore be valued at more than $344,000 per year for the domestic employment benefits to offset the consumer harm.