Threatening to Increase Productivity
AbstractThe 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. After it lost its legal monopoly, Petrobras total factor productivity increased sharply. 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 InfoPaper provided by Fucape Business School in its series Fucape Working Papers with number 19.
Date of creation: Dec 2009
Date of revision:
Publication status: Published in Fucape Working Papers Dezembro 2009
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Other versions of this item:
- L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
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