The Consequences of the US DOJ's Antitrust Activities : A Macroeconomic Perspective

Do the antitrust law enforcement activities of the US Department of Justice act as exogenous "technology shocks", an essential element of real business cycle theory that hitherto has eluded direct empirical corroboration, or as "markup shocks" limiting market power and promoting economic expansion? We analyze annual time series data from 1947 to 2003 on three measures of federal antitrust intervention: the ratio of the Antitrust Division's budgetary expenditures to GDP as well as the numbers of civil and criminal antitrust cases instituted. The evidence suggests that changes in the levels of these policy variables act like negative technology shocks to productivity growth. Moreover, the negative effects are found to be transitory; antitrust policy generates no subsequent offsetting (net) increases in productivity