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Competitive pressure and labor productivity: world iron ore markets in the 1980s

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Author Info
Jose E. Galdon-Sanchez
James A. Schmitz, Jr.

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Abstract

Does the extent of competitive pressure industries face influence their productivity? We study a natural experiment conducted in the iron ore industry as a result of the collapse in world steel production in the early 1980s. For iron ore producers, whose only market is the steel industry, this collapse was an exogenous shock. The drop in steel production differed dramatically by region: it fell by about a third in the Atlantic Basin but only very little in the Pacific Basin. Given that the cost of transporting iron ore is very high relative to its mine value, Atlantic iron ore producers faced a much greater increase in competitive pressure than did Pacific iron ore producers. In response to the crisis, most Atlantic iron ore producers doubled their labor productivity; Pacific iron ore producers experienced few productivity gains. ; This article originally appeared in the American Economic Review. (c) American Economic Association.

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Article provided by Federal Reserve Bank of Minneapolis in its journal Quarterly Review.

Volume (Year): (2003)
Issue (Month): Spr ()
Pages: 9-23
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Handle: RePEc:fip:fedmqr:y:2003:i:spr:p:9-23:n:v.27no.2

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Keywords: Labor productivity ; Steel industry and trade;

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ferreira, Pedro Cavalcanti Gomes & Rossi Junior, José Luiz, 2001. "New Evidence on Trade Liberalization and Productivity Growth," Economics Working Papers (Ensaios Economicos da EPGE) 433, Graduate School of Economics, Getulio Vargas Foundation (Brazil). [Downloadable!]
  2. Tybout, James & de Melo, Jamie & Corbo, Vittorio, 1991. "The effects of trade reforms on scale and technical efficiency : New evidence from Chile," Journal of International Economics, Elsevier, vol. 31(3-4), pages 231-250, November. [Downloadable!] (restricted)
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  3. Prescott, Edward C, 1998. "Needed: A Theory of Total Factor Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 525-51, August.
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  4. Francisco Rodriguez & Dani Rodrik, 1999. "Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-national Evidence," Electronic Working Papers 99-003, University of Maryland, Department of Economics. [Downloadable!]
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  5. Francisco Rodriguez & Dani Rodrik, 1999. "Trade Policy and Economic Growth: A Skeptic's Guide to Cross-National Evidence," NBER Working Papers 7081, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Lundgren, Nils-Gustav, 1996. "Bulk trade and maritime transport costs : The evolution of global markets," Resources Policy, Elsevier, vol. 22(1-2), pages 5-32. [Downloadable!] (restricted)
  7. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  8. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 724-46, August. [Downloadable!] (restricted)
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  9. Stephen L. Parente & Edward C. Prescott, 1999. "Monopoly Rights: A Barrier to Riches," American Economic Review, American Economic Association, vol. 89(5), pages 1216-1233, December. [Downloadable!] (restricted)
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  10. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-97, November. [Downloadable!] (restricted)
  11. MacDonald, James M, 1994. "Does Import Competition Force Efficient Production?," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 721-27, November. [Downloadable!] (restricted)
  12. Daniel Trefler, 2004. "The Long and Short of the Canada-U. S. Free Trade Agreement," American Economic Review, American Economic Association, vol. 94(4), pages 870-895, September. [Downloadable!]
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  13. Severin Borenstein & Joseph Farrell, 1999. "Do Investors Forecast Fat Firms? Evidence from the Gold Mining Industry," NBER Working Papers 7075, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. William L. Megginson & Jeffry M. Netter, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June. [Downloadable!] (restricted)
  15. Pedro Cavalcanti Ferreira & JosÈ Luiz Rossi, 2003. "New Evidence from Brazil on Trade Liberalization and Productivity Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1383-1405, November. [Downloadable!] (restricted)
  16. Tybout, James R. & Westbrook, M. Daniel, 1995. "Trade liberalization and the dimensions of efficiency change in Mexican manufacturing industries," Journal of International Economics, Elsevier, vol. 39(1-2), pages 53-78, August. [Downloadable!] (restricted)
  17. Holmes, Thomas J. & Jr., James A. Schmitz, 2001. "A gain from trade: From unproductive to productive entrepreneurship," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 417-446, April. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Vicente Cuñat & Maria Guadalupe, 2009. "Globalization and the Provision of Incentives inside the Firm: The Effect of Foreign Competition," Economics Working Papers 1134, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
  2. Marcello D'Amato & Riccardo Martina & Salvatore Piccolo, 2005. "Endogenous Managerial Contract," CSEF Working Papers 148, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Jul 2006. [Downloadable!]
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