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Competition and Productivity: Evidence from the Post WWII U.S. Cement Industry

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Author Info

  • Timothy Dunne
  • Shawn Klimek
  • James Schmitz, Jr.

Abstract

In the mid 1980s, the U.S. cement industry faced a large increase in foreign competition. Foreign cement producers began offering cement at very large discounts on U.S. prices. We show that productivity (measured by TFP) in the industry was falling during the 1960s and 1970s, but that following the increase in competition, productivity has reversed course and is growing strongly. When foreign competition was weak, productivity fell. When it was strong, productivity grew robustly. We explore the reasons for the large productivity increase. We argue that a large share of the productivity gains resulted from significant changes in management practices at plants.

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File URL: ftp://ftp2.census.gov/ces/wp/2010/CES-WP-10-29.pdf
File Function: First version, 2010
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Bibliographic Info

Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 10-29.

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Length: 46 pages
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:cen:wpaper:10-29

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References

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  1. Hector Perez-Saiz, 2010. "Building New Plants or Entering by Acquisition? Estimation of an Entry Model for the U.S. Cement Industry," Working Papers 10-08, Center for Economic Studies, U.S. Census Bureau.
  2. Edward Prescott & Ellen McGrattan, 2008. "Openness, Technology Capital, and Development," 2008 Meeting Papers 111, Society for Economic Dynamics.
  3. Thomas J. Holmes & David K. Levine & James A. Schmitz, Jr., 2008. "Monopoly and the incentive to innovate when adoption involves switchover disruptions," Staff Report 402, Federal Reserve Bank of Minneapolis.
  4. Nicholas Bloom & David McKenzie, 2010. "Does Management Matter? Evidence From India," Discussion Papers 10-014, Stanford Institute for Economic Policy Research.
  5. José E. Galdón-Sánchez & James A. Schmitz Jr., 2002. "Competitive Pressure and Labor Productivity: World Iron-Ore Markets in the 1980's," American Economic Review, American Economic Association, vol. 92(4), pages 1222-1235, September.
  6. Petia Topalova, 2004. "Trade Liberalization and Firm Productivity," IMF Working Papers 04/28, International Monetary Fund.
  7. Mary Amiti & Jozef Konings, 2007. "Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia," American Economic Review, American Economic Association, vol. 97(5), pages 1611-1638, December.
  8. Førsund, Finn R. & Hjalmarsson, Lennart, 1983. "Technical Progress and Structural Change in the Swedish Cement Industry 1955 - 1979," Working Paper Series 98, Research Institute of Industrial Economics.
  9. Kumbhakar, Subal C. & Heshmati, Almas & Hjalmarsson, Lennart, 1997. "Temporal patterns of technical efficiency: Results from competing models," International Journal of Industrial Organization, Elsevier, vol. 15(5), pages 597-616, August.
  10. Alberto Salvo, 2010. "Inferring market power under the threat of entry: the case of the Brazilian cement industry," RAND Journal of Economics, RAND Corporation, vol. 41(2), pages 326-350.
  11. Bloom, Nicholas & Draca, Mirko & Van Reenen, John, 2011. "Trade induced technical change? The impact of Chinese imports on innovation, IT and productivity," CEPR Discussion Papers 8236, C.E.P.R. Discussion Papers.
  12. Marc-Andreas Muendler, 2004. "Trade, Technology, and Productivity: A Study of Brazilian Manufacturers, 1986-1998," CESifo Working Paper Series 1148, CESifo Group Munich.
  13. James A. Schmitz, Jr., 2005. "What determines productivity? lessons from the dramatic recovery of the U.S. and Canadian iron-ore industries following their early 1980s crisis," Staff Report 286, Federal Reserve Bank of Minneapolis.
  14. Das, Sanghamitra, 1991. "Estimation of Fuel Coefficients of Cement Production: A Fixed-Effects Approach to Nonlinear Regression," Journal of Business & Economic Statistics, American Statistical Association, vol. 9(4), pages 469-74, October.
  15. Kumbhakar, Subal C & Heshmati, Almas & Hjalmarsson, Lennart, 1999. " Parametric Approaches to Productivity Measurement: A Comparison among Alternative Models," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(3), pages 405-24, September.
  16. Nick Bloom & John Van Reenen, 2006. "Measuring and Explaining Management Practices Across Firms and Countries," NBER Working Papers 12216, National Bureau of Economic Research, Inc.
  17. Allan Collard-Wexler, 2006. "Plant Turnover and Demand Fluctuations in the Ready-Mix Concrete Industry," Working Papers 06-08, Center for Economic Studies, U.S. Census Bureau.
  18. Victor Gomes & Arilton Teixeira & Benjamin Bridgman, 2008. "The Threat of Competition Enhances Productivity," 2008 Meeting Papers 302, Society for Economic Dynamics.
  19. Fernandes, Ana M., 2003. "Trade policy, trade volumes, and plant-level productivity in Colombian manufacturing industries," Policy Research Working Paper Series 3064, The World Bank.
  20. Thomas J. Holmes & James A. Schmitz, Jr., 2001. "Competition at work : railroads vs. monopoly in the U.S. shipping industry," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-29.
  21. Hay, Donald A, 2001. "The Post-1990 Brazilian Trade Liberalisation and the Performance of Large Manufacturing Firms: Productivity, Market Share and Profits," Economic Journal, Royal Economic Society, vol. 111(473), pages 620-41, July.
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Citations

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Cited by:
  1. James A. Schmitz, Jr., 2012. "New and larger costs of monopoly and tariffs," Staff Report 468, Federal Reserve Bank of Minneapolis.
  2. Nicholas Bloom & Mirko Draca & John Van Reenen, 2011. "Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity," CEP Discussion Papers dp1000, Centre for Economic Performance, LSE.
  3. Carlos Lamarche, 2013. "Industry-wide work rules and productivity: evidence from Argentine union contract data," IZA Journal of Labor & Development, Springer, vol. 2(1), pages 1-25, December.
  4. Sanghamitra Das & Kala Krishna & Sergey Lychagin & Rohini Somanathan, 2010. "Back on the Rails: Competition and Productivity in State-owned Industry," NBER Working Papers 15976, National Bureau of Economic Research, Inc.
  5. Lamarche, Carlos, 2013. "Industry-Wide Work Rules and Productivity: Evidence from Argentine Union Contract Data," IZA Discussion Papers 7673, Institute for the Study of Labor (IZA).
  6. Benjamin Bridgman, 2011. "Competition, Work Rules and Productivity," 2011 Meeting Papers 289, Society for Economic Dynamics.
  7. Thomas J. Holmes & David K. Levine & James A. Schmitz, 2012. "Monopoly and the Incentive to Innovate When Adoption Involves Switchover Disruptions," American Economic Journal: Microeconomics, American Economic Association, vol. 4(3), pages 1-33, August.
  8. Sungwon Lee & Young Lee, 2014. "Stochastic frontier models with threshold efficiency," Journal of Productivity Analysis, Springer, vol. 42(1), pages 45-54, August.
  9. Van Reenen, John, 2011. "Does competition raise productivity through improving management quality?," International Journal of Industrial Organization, Elsevier, vol. 29(3), pages 306-316, May.

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