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 su±cient 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 ¯rms does not occur. We study productivity at Brazil's state-owned oil company Petrobras. After it lost its legal monopoly Petrobras's 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 su±cient 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 University Library of Munich, Germany in its series MPRA Paper with number 33024.
Date of creation: 2010
Date of revision:
Productivity; Competition; Oil Industry;
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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