THE study of merger activity has been of long-standing interest to economists as well as the financial community. References to merger activity in American industry generally acknowledge three major merger movements. The first one occurred during the turn of the century, the second one during the 1920s. Stigler (1950) describes the second merger wave as being for oligopoly in contrast with the earlier for monopoly movement. Increased market power through consolidation and corporate concentration and operating economies of scale were identified as motives for mergers during these two waves. Horizontal mergers (i.e., mergers between direct competitors) were relatively more important during the first merger wave with vertical mergers (i.e., mergers between firms with prior buyer-seller relationships) being significant in the second wave.' Currently the United States is in the midst of its third major merger wave which began after the end of World War II. This has become known as the conglomerate merger wave because of the emphasis on mergers between unrelated firms or firms seeking product extension objectives (i.e., mergers between firms functionally related in terms of distribution and/or production facilities but whose products are not directly competing).2 The direction of the current merger wave can be partially explained by the fact that the Celler-Kefauver amendment to the Clayton Act in 1950 discourages horizontal and vertical mergers. While many authors have engaged in the study of mergers in the United States, the empirical examination of changes in aggregate merger activity has been limited both as to type and time period covered. Nelson (1959) first examined changes in quarterly merger activity during the 1895-1920 period and found a high positive correlation between changes in merger activity and changes in stock prices, and a positive but lower correlation between mergers and industrial activity. Further study by Nelson, however, showed that for the 1919-1954 period the relationship between mergers and stock prices was considerably weaker. In a follow up study, which extended aggregate merger data through 1962, Nelson (1966) concluded that merger activity exhibited a positive and highly consistent response to changes in business activity (as measured by the reference or business cycle). In addition to the efforts by Nelson, Weston (1961) examined annual changes in merger activity during the interwar period (between World War I and World War II). Using a multiple regression model, Weston found merger activity to be significantly related to stock prices but not significantly related to industrial production activity. Previous studies provide only limited insights into the structural (especially lead-lag) relationships between aggregate merger activity and macroeconomic/market factors. The literature is particularly void of empirical studies which investigate such relationships during the current merger period.3 It is this subject which we address in this paper. We employ a data-based multiple time series approach to develop an explanatory model for describing changes in the incidence of Received for publication July 14, 1981. Revision accepted for publication December 17, 1982. * University of Colorado, University of Iowa, and University of Denver, respectively. Computer facility support from the University of Iowa along with multiple time series programs provided by the University of Wisconsin-Madison are gratefully acknowledged. We also wish to thank the referees for their helpful comments. ' These two merger waves or movements were extensively studied, either separately or together, by Eis (1969), Markham (1955), Nelson (1959), Stigler (1950), Thorp (1941), and Weston (1961), as well as others. 2 The current merger movement, either separately or in conjunction with the earlier movements or waves, was analyzed by Lintner (1971), Lynch (1971), Markham (1973), Nelson'(1966), Reid (1968), and Steiner (1975). 3 International investigation of aggregate merger activity during the 1960s and 1970s is reported in Mueller (1980). Visual examination of the movement of mergers, GNP, and stock prices in Belgium suggested generally positive relationships. Aggregate merger activity was compared individually against economic activity (GDP), gross fixed investment, and share prices in West Germany. During the 1960s mergers tended to move in step with changes in economic activity and investment while lagging share prices. However, in the 1970s merger activity tended to lead the other aggregate measures. The best overall relationship was between merger activity and share prices.

Kenneth D. Garbade, William L. Silber, Lawrence J. White, Market Reaction to the Filing of Antitrust Suits: An Aggregate and Cross-Sectional Analysis, The Review of Economics and Statistics, Vol. 64, No. 4 (Nov., 1982), pp. 686-691

W HILE debate rages on, it seems only a matter of time before some form of national health insurance becomes a reality. Aside from the central questions regarding coverage, financing, and eligibility, an important issue involves the administration of such an insurance program. A recent analysis of 13 proposed national health insurance bills found that 10 of the bills include the existing industry to one degree or another.' This strategy makes sense because of the expertise and machinery that presently exist within the health insurance industry. If such a strategy is adopted, the fundamental problem of allocating the administrative responsibility remains. There is wide disparity in the average costs of administration among the insuring organizations. Ideally, designation of responsibility for administering any national health insurance program should be based upon efficiency considerations. To the extent that economies of scale are present within the administrative function of existing health insurers, centralization in one or a few hands can be justified. In contrast, if economies of scale are not present, administrative responsibility should be decentralized on efficiency grounds. The purpose of the present paper is to examine the administrative cost experience of the commercial health insurers in an effort to determine whether economies of scale exist.

We evaluate the effect of a change in the energy code applied to buildings using residential billing data on electricity and natural gas, combined with data on observable characteristics of each residence. The study is based on comparisons between residences constructed just before and after an increase in the stringency of Florida's energy code in 2002. We find that the code change is associated with a decrease in the consumption of electricity by 4% and natural gas by 6%. We estimate average social and private payback periods that range between 3.5 and 6.4 years.

This paper develops a framework for inferring common Markov-switching components in panel data sets with large cross-section and time series dimensions. We study similarities and differences across U.S. states in the timing of business cycles. We hypothesize that there exists a small number of cluster designations, with individual states in a given cluster sharing certain business cycle characteristics. We find that although oil-producing and agricultural states can sometimes experience a separate recession from the rest of the United States, for the most part, differences across states appear to be a matter of timing, with some states entering recession or recovering before others.

Despite their ubiquity, observational studies to infer the causal effect of a so-called immutable characteristic, such as race or sex, have struggled for coherence, given the unavailability of a manipulation analogous to a “treatment” in a randomized experiment and the danger of posttreatment bias. We demonstrate that a shift in focus from actual traits to perceptions of them can address both of these issues while facilitating articulation of other critical concepts, particularly the timing of treatment assignment. We illustrate concepts by discussing the designs of various studies of the role of race in trial court death penalty decisions.

This paper brings historical evidence to bear on the stylized fact that the yield curve predicts future growth. The spread between corporate bonds and commercial paper reliably predicts future growth over the period 1875–1997. This predictability varies over time, however, and has been strongest in the post–World War II period.

Using microdata from the 1994–1998 International Adult Literacy Survey for nine countries, we examine the role of cognitive skills in explaining higher wage inequality in the United States. We find that while the greater dispersion of cognitive test scores in the United States plays a part in explaining higher U.S. wage inequality, higher labor market prices (i.e., higher returns to measured human capital and cognitive performance) and greater residual inequality still play important roles, and are, on average, quantitatively considerably more important than differences in the distribution of test scores in explaining higher U.S. wage inequality.

In this paper, we examine empirically whether risk pooling is more advantageous among altruistic compared to selfish agents in a framework where individuals cannot make binding commitments. In particular, we incorporate altuism into a model of risk sharing under imperfect commitment and use simulation methods to establish tests of the roles of both altruism and commitment problems in determining the extent of insurance and the intertemporal movements in interhousehold transfers. The tests are carried out using three panel data sets from two countries of rural South Asia that provide detailed information on transfers and enable the measurement of income shocks. The estimates provide strong support for the notion that imperfect commitment substantially constrains informal transfer arrangements, whether kin-based or not, but also provide evidence that altruism plays an important role in ameliorating commitment constraints and thus in increasing the gains from income pooling.