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Productivity Trends in the Coal Mining Industry in Canada

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  • Jeremy Smith

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    Abstract

    The purpose of this report is to uncover the factors behind what has been a very strong productivity performance from the coal mining industry in Canada over the past four decades. It is found that real price movements have had a substantial impact on productivity growth in the coal mining industry in Canada. The real price of coal increased sharply in the 1970s due to higher demand caused by the oil price shock. This increased the profitability of sites of marginal quality and thereby lead to operations on less productive sites than those in production at that point. This had the effect of lowering the average productivity of the overall industry. However, since the 1970s, the real price of coal has fallen steadily, reversing this effect and hence contributing to the high productivity growth of the 1980s and 1990s. Another factor in this impressive productivity performance, at least in the 1980s, was the gradual closing of underground coal mines and the concentration of production on open surface mines. Surface mines typically have higher levels of labour productivity than underground mines, so this effect reinforced the price effect in increasing the average productivity of the industry. The 1990s saw the computerization of several stages of the production process, from site planning to extraction. Despite having the image of an old-fashioned industry, the coal mining industry in Canada is actually among the most intensive users of advanced technologies, and this certainly appears to have contributed to the industry’s strong productivity performance as well.

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    File URL: http://www.csls.ca/reports/csls2004-07.pdf
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    Paper provided by Centre for the Study of Living Standards in its series CSLS Research Reports with number 2004-07.

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    Date of creation: Oct 2004
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    Handle: RePEc:sls:resrep:0407

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    Keywords: Coal Mining; Coal Industry; Mining; Mining Industry; Canada; Productivity; Productivity Growth;

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    1. Boyd, Gale A, 1987. "Factor Intensity and Site Geology as Determinants of Returns to Scalein Coal Mining," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 18-23, February.
    2. Paul M. Romer, 1987. "Crazy Explanations for the Productivity Slowdown," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 163-210 National Bureau of Economic Research, Inc.
    3. Brown, Charles & Medoff, James, 1978. "Trade Unions in the Production Process," Journal of Political Economy, University of Chicago Press, vol. 86(3), pages 355-78, June.
    4. Robin Boadway & Neil Bruce & Ken McKenzie & Jack Mintz, 1987. "Marginal Effective Tax Rates for Capital in the Canadian Mining Industry," Canadian Journal of Economics, Canadian Economics Association, vol. 20(1), pages 1-16, February.
    5. Brian Chezum & John Garen, 1998. "Are union productivity effects overestimated?: evidence from coal mining," Applied Economics, Taylor & Francis Journals, vol. 30(7), pages 913-918.
    6. Kissell, Fred N, 2000. " Insights on Technology Transfer from the Bureau of Mines," The Journal of Technology Transfer, Springer, vol. 25(1), pages 5-8, March.
    7. Asafu-Adjaye, J. & Mahadevan, R., 2003. "How cost efficient are Australia's mining industries?," Energy Economics, Elsevier, vol. 25(4), pages 315-329, July.
    8. Andrews-Speed, Philip & Rogers, Christopher D., 1999. "Mining taxation issues for the future," Resources Policy, Elsevier, vol. 25(4), pages 221-227, December.
    9. Kulshreshtha, Mudit & Parikh, Jyoti K., 2002. "Study of efficiency and productivity growth in opencast and underground coal mining in India: a DEA analysis," Energy Economics, Elsevier, vol. 24(5), pages 439-453, September.
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