Tristan Reed

Forty percent of economic activities in Mexico weighed by sales have been investigated for illegal monopolistic practices since the Federal Competition Commission was established in 1993. By exploiting some unique features of the Mexican investigative system, and using a synthetic control approach, this paper examines the causal impact of antitrust sanctions on industry performance and aggregate outcomes. Sanctions cause sales and wages to increase and profit margins to fall in the sanctioned sectors, thus benefiting consumers and workers. Overall, antitrust enforcement contributes roughly half a percent of per capita gross domestic product growth. Outcomes of investigations that are closed without sanction fail to reject the hypothesis that some harmful conduct is not sanctioned because investigators lack resources to prove it conclusively. An implication is that the Commission could generate greater benefits with additional investigative resources.

Interference across competing firms in RCTs can be informative about market structure. An experiment that subsidizes a random subset of traders who buy cocoa from farmers in Sierra Leone illustrates this idea. Interpreting treatment-control differences in prices and quantities purchased from farmers through a model of Cournot competition reveals differentiation between traders is low. Combining this result with quasi-experimental variation in world prices shows that the number of traders competing is 50 percent higher than the number operating in a village. Own-price and cross-price supply elasticities are high. Farmers face a competitive market in this first stage of the value chain.