AEA Weekly Digest

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.

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We study the effects of the largest corporate income tax cut in U.S. history on firms and workers. To identify causal effects, we use employer-employee matched tax records and event studies comparing similarly sized firms in the same industry that faced divergent tax changes due to their pre-existing legal status. Tax cuts cause increases in firms’ investment, sales, profits, employment, and payrolls, with earnings gains concentrated among highly paid workers. In the short-run, 87% of private income gains flow to the top 10% of the income distribution.