On the effectiveness of Recidivism on Productivity Growth: Evidence from anti-cartel enforcement in the US

Explicit collusion, or cartel behavior, involves coordinated efforts among firms within a market to restrict competition for their mutual benefit. Recidivism in this context occurs when cartel members, previously fined for such activities, establish a new cartel in the future. This paper examines 111 cartel cases from various markets and periods in the US to assess the impact of recidivism on productivity growth. We define a recidivist as a repeat offender with at least two fines. Investigating the causality between cartel recidivism and total factor productivity (TFP) growth is crucial for several reasons. First, understanding this relationship helps policymakers and regulators design more effective anti-cartel enforcement strategies. Second, examining the causality between cartel recidivism and TFP growth provides insights into the broader economic impacts of anti-competitive practices. Ultimately, such investigations help in creating a more efficient and equitable economy, where market forces drive productivity improvements and sustainable economic growth. Our econometric findings drawn from OLS and quantile regression analysis indicate a negative relationship between recidivism and productivity growth. The rationale is that recidivism undermines the effectiveness of anti-cartel enforcement, which consequently hampers productivity growth in the affected markets.