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Threatening to Increase Productivity: Evidence from Brazil's Oil Industry

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  • Bridgman, Benjamin
  • Gomes, Victor
  • Teixeira, Arilton

Abstract

Summary The wave of privatization in the 1980s and 1990s increased productivity of many previously state owned enterprises (SOEs). However, governments often do not have sufficient support to privatize SOEs. We provide evidence that threatening privatization and market competition (entry of new firms) can increase the productivity of SOEs, even though privatization and entry of new firms does not occur. We study productivity at Brazil's state-owned oil company Petrobras. Petrobras's total factor productivity increased sharply after it lost its legal monopoly, doubling in 6Â years. These large gains occurred despite the fact that Petrobras faced no immediate de facto competition. The threat of competition and privatization was sufficient to generate large productivity gains. These findings suggest that changing the competitive environment can be a powerful force for improving productivity at state-owned firms.

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Bibliographic Info

Article provided by Elsevier in its journal World Development.

Volume (Year): 39 (2011)
Issue (Month): 8 (August)
Pages: 1372-1385

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Handle: RePEc:eee:wdevel:v:39:y:2011:i:8:p:1372-1385

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Web page: http://www.elsevier.com/locate/worlddev

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Keywords: productivity competition oil South America Brazil;

References

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Citations

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Cited by:
  1. Rohini Somanathan & Sanghamitra Das & Kala Krishna & Sergey Lychagin, 2010. "Back on the Rails: Competition and Productivity in State-owned Industry," Working Papers id:2835, eSocialSciences.
  2. Benjamin Bridgman, 2011. "Competition, Work Rules and Productivity," 2011 Meeting Papers 289, Society for Economic Dynamics.
  3. John E. Tilton, 2013. "Cyclical and Secular Determinants of Productivity in the Copper, Aluminum, Iron Ore, and Coal Industries," Working Papers 2013-11, Colorado School of Mines, Division of Economics and Business.

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