Vertical integration in the U.S. Paper industry

This study finds an evidence of the effect of transaction costs on vertical integration. Based on data on paper mill capacity in 11 states in 1982 and 1992, transaction costs have a positive effect on vertical integration if the resources for producing pulp are relatively limited, and the effect is smaller as the resources increase. These results are consistent in both OLS and logit estimation in which continuous measure and discrete measure of vertical integration are used as dependent variables, respectively.