Horizontal mergers raise revenue productivity 4 percent in Spain
Analyzing 3,759 horizontal mergers in Spain between 1997 and 2022, a Banco de España study finds that post-deal revenue productivity rises 4 percent and markups rise 5 to 6 percent within eight years. Correcting accounting boundary shifts proves essential to avoid false negative estimates.
Virtual consolidation reveals hidden gains
Jacob T. Hess and Xufeng Wang analyze 3,759 horizontal mergers in Spain between 1997 and 2022 using commercial registry filings.
Because acquired targets vanish from corporate reporting, standard acquirer-only panels confound operational changes with shifting entity boundaries.
By pooling pre-merger accounts to construct a virtual consolidated firm, the authors maintain a constant measurement boundary.
On this consistent unit, gross-output revenue productivity rises 4 percent within eight years, and markups expand 5 to 6 percent.
Without this boundary correction, measured productivity falls 2 percent and markups drop up to 4 percent, completely reversing empirical findings.
Broad efficiency versus concentrated pricing
Cross-industry decomposition reveals divergent mechanisms across sectors.
Revenue productivity gains are widespread, appearing across wholesale trade, retail, and food manufacturing.
Markup growth, however, is heavily concentrated.
Markups jump 16.1 percent in human health activities and 12.4 percent in specialized construction, while wholesale trade shows no significant change.
The authors emphasize that “large markup increases are a feature of specific industries rather than a general consequence of consolidation.”
Crucial fix, incomplete picture
Accounting artifacts can completely invert merger analysis when researchers overlook corporate boundaries.
Yet reliance on revenue data still prevents analysts from separating physical efficiency from pricing power.
Competition authorities should welcome the boundary fix but remain wary of broad efficiency claims.