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Threatening to increase productivity

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  • Bridgman, Benjamin
  • Gomes, Victor
  • Teixeira, Arilton

Abstract

The 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 Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 33024.

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Date of creation: 2010
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Handle: RePEc:pra:mprapa:33024

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Keywords: Productivity; Competition; Oil Industry;

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References

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  1. David McKenzie & Dilip Mookherjee, 2003. "The Distributive Impact of Privatization in Latin America: Evidence from Four Countries," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
  2. Austan Goolsbee & Chad Syverson, 2008. "How do Incumbents Respond to the Threat of Entry? Evidence from the Major Airlines," The Quarterly Journal of Economics, MIT Press, vol. 123(4), pages 1611-1633, November.
  3. Bresnahan, Timothy F & Reiss, Peter C, 1991. "Entry and Competition in Concentrated Markets," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 977-1009, October.
  4. Edward C. Prescott & Stephen L. Parente, 1999. "Monopoly Rights: A Barrier to Riches," American Economic Review, American Economic Association, vol. 89(5), pages 1216-1233, December.
  5. Mirta N.S. Bugarin & Roberto Ellery Jr & Victor Gomes & Arilton Teixeira, 2002. "The Brazilian Depression in the 1980s and 1990s," Computing in Economics and Finance 2002 338, Society for Computational Economics.
  6. 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.
  7. Jose E. Galdon-Sanchez & James A. Schmitz, Jr., 2003. "Competitive pressure and labor productivity: world iron ore markets in the 1980s," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 9-23.
  8. 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.
  9. Roberto Ellery Júnior & Mirta N. S. Bugarin & Victor Gomes & Arilton Teixeira, 2004. "Investment and Capital Accumulation in Brazil from 1970 to 2000: A Neoclassical View," Working papers - Textos para Discussao do Departamento de Economia da Universidade de Brasilia 316, Departamento de Economia da Universidade de Brasilia.
  10. Mirta N. S. Bugarin & Roberto Ellery Jr. & Victor Gomes & Arilton Teixeira, 2005. "From Miracle to Disaster: the Brazilian Economy in the Last 3 Decades," DEGIT Conference Papers c010_009, DEGIT, Dynamics, Economic Growth, and International Trade.
  11. Libecap, Gary D & Wiggins, Steven N, 1985. "The Influence of Private Contractual Failure on Regulation: The Case of Oil Field Unitization," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 690-714, August.
  12. Garcia, Patricio & Knights, Peter F. & Tilton, John E., 2001. "Labor productivity and comparative advantage in mining:: the copper industry in Chile," Resources Policy, Elsevier, vol. 27(2), pages 97-105, June.
  13. 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.
  14. Timothy J. Kehoe & Edward C. Prescott, 2002. "Great Depressions of the Twentieth Century," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 1-18, January.
  15. 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.
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