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Market Consolidation and Productivity Growth in U.S. Wireline Telecommunications: Stochastic Frontier Analysis vs. Malmquist Index

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Abstract

This study analyzes the merger effects for 25 Incumbent Local Exchange Carriers over the period 1996–2005 using stochastic frontier analysis with a time-varying inefficiency model. We further conduct a comparison of results between the stochastic frontier analysis and the Malmquist index method. The empirical results indicate that the sample of telecommunications firms has experienced deterioration in average productivity growth following mergers. Significantly, both approaches suggest that firms that do not merge underperform in terms of average productivity growth.

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Authors and Affiliations

  1. Korea Insurance Research Institute, 35–4, Youido-dong, Seoul, 150-600, Korea

    Daigyo Seo

  2. Kansas State University, 313 Waters Hall, Manhattan, KS, 66506-4011, USA

    Allen M. Featherstone & Yuan Gao

  3. Kansas State University, 216 Waters Hall, Manhattan, KS, 66506-4011, USA

    Dennis L. Weisman

Authors
  1. Daigyo Seo
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  2. Allen M. Featherstone
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  3. Dennis L. Weisman
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  4. Yuan Gao
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Correspondence to Allen M. Featherstone.

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Seo, D., Featherstone, A.M., Weisman, D.L. et al. Market Consolidation and Productivity Growth in U.S. Wireline Telecommunications: Stochastic Frontier Analysis vs. Malmquist Index. Rev Ind Organ 36, 271–294 (2010). https://doi.org/10.1007/s11151-010-9245-9

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  • DOI: https://doi.org/10.1007/s11151-010-9245-9

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