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Privatization's impact on private productivity: the case of Brazilian iron ore

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  • James A. Schmitz, Jr.
  • Arilton Teixeira

Abstract

A major motivation for the wave of privatizations of state-owned enterprises (SOEs) in the last twenty years was a belief that privatization would increase economic efficiency. There are now many studies showing most privatizations achieved this goal. Our theme is that the productivity gains from privatization are much more general and widespread than has typically been recognized in this literature. In assessing the productivity gains from privatization, the literature has only examined the productivity gains accruing at the privatized SOEs. But privatization may have significant impact on the private producers that often exist side-by-side with SOEs. In this paper we show that this was indeed the case when Brazil privatized its SOEs in the iron ore industry. That is, after their privatization, the iron ore SOEs dramatically increased their labor productivity, but so did the private iron ore companies in the industry.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 337.

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Date of creation: 2004
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Publication status: Published in Review of Economic Dynamics
Handle: RePEc:fip:fedmsr:337

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Keywords: Iron industry and trade ; Privatization ; Labor productivity;

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  1. A. Tarik Timur & Allen Ponak, 2002. "Labor Relations and Technological Change at Canadian Pacific Railway ," Journal of Labor Research, Transaction Publishers, vol. 23(4), pages 535-557, October.
  2. James A. Schmitz, Jr., 1997. "Government production of investment goods and aggregate labor productivity," Staff Report 240, Federal Reserve Bank of Minneapolis.
  3. Forsyth, P J & Hocking, R D, 1980. "Property Rights and Efficiency in a Regulated Environment: The Case of Australian Airlines," The Economic Record, The Economic Society of Australia, vol. 56(153), pages 182-85, June.
  4. Rafael La Porta & Florencio López-de-Silanes, 1997. "The Benefits of Privatization : Evidence from Mexico," World Bank Other Operational Studies 11583, The World Bank.
  5. 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.
  6. Rafael La Porta & Florencio Lopez-deSilanes & Andrei Shleifer, 2000. "Government Ownership of Banks," Harvard Institute of Economic Research Working Papers 1890, Harvard - Institute of Economic Research.
  7. Jeffry M. Netter & William L. Megginson, 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.
  8. Coate, Stephen & Morris, Stephen, 1995. "On the Form of Transfers in Special Interests," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1210-35, December.
  9. Davies, David G, 1971. "The Efficiency of Public versus Private Firms, The Case of Australia's Two Airlines," Journal of Law and Economics, University of Chicago Press, vol. 14(1), pages 149-65, April.
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Cited by:
  1. Harold L. Cole & Lee E. Ohanian & Alvaro Riascos & James A. Schmitz, Jr., 2006. "Latin America in the rearview mirror," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sep.
  2. Steven J. Davis & Luis Rivera-Batiz, 2005. "The Climate for Business Development and Employment Growth in Puerto Rico," NBER Working Papers 11679, National Bureau of Economic Research, Inc.
  3. Mark Aguiar & Gita Gopinath, 2004. "Emerging Market Business Cycles: The Cycle is the Trend," NBER Working Papers 10734, National Bureau of Economic Research, Inc.
  4. Mark Aguiar & Gita Gopinath, 2008. "Emerging Market Fluctuations: The Role of Interest Rates and Productivity Shocks," Central Banking, Analysis, and Economic Policies Book Series, in: Kevin Cowan & Sebastián Edwards & Rodrigo O. Valdés & Norman Loayza (Series Editor) & Klaus Schmid (ed.), Current Account and External Financing, edition 1, volume 12, chapter 9, pages 345-367 Central Bank of Chile.
  5. Mark Aguiar & Guita Gopinath, 2007. "The Role of Interest Rates and Productivity Shocks in Emerging Market Fluctuations," Working Papers Central Bank of Chile 445, Central Bank of Chile.
  6. Luiz de Mello, 2011. "Brazil’s Achievements and Challenges," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 12(1), pages 3-10, 03.
  7. Ricardo Antonio de Castro Pereira & Pedro Cavalcanti Ferreira, 2008. "Impactos de bem-estar da privatização de infra-estrutura," Anais do XXXVI Encontro Nacional de Economia [Proceedings of the 36th Brazilian Economics Meeting] 200807211501060, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  8. Roberto Chang & Constantino Hevia & Norman Loayza, 2010. "Privatization and Nationalization Cycles," NBER Working Papers 16126, National Bureau of Economic Research, Inc.
  9. Das, Amarendra, 2012. "Who extracts minerals more efficiently—Public or private firms? A study of Indian mining industry," Journal of Policy Modeling, Elsevier, vol. 34(5), pages 755-766.
  10. Chakraborty, Suparna & Otsu, Keisuke, 2012. "Deconstructing Growth - A Business Cycle Accounting Approach with application to BRICs," MPRA Paper 41076, University Library of Munich, Germany.
  11. Araújo, Eurilton, 2012. "Investment-specific shocks and real business cycles in emerging economies: Evidence from Brazil," Economic Modelling, Elsevier, vol. 29(3), pages 671-678.
  12. Arilton Teixeira & Mirta N. S. Bugarin & Roberto Ellery Jr. & Victor Gomes, 2009. "From a Miracle to a Disaster: the Brazilian Economy in the 3 last Decades," Fucape Working Papers 20, Fucape Business School.
  13. Bridgman, Benjamin & Gomes, Victor & Teixeira, Arilton, 2011. "Threatening to Increase Productivity: Evidence from Brazil's Oil Industry," World Development, Elsevier, vol. 39(8), pages 1372-1385, August.
  14. Arilton Teixeira & Benjamin Bridgman & Victor Gomes, 2005. "Sustainable Miracles," 2005 Meeting Papers 421, Society for Economic Dynamics.

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