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Mining Surplus: Modeling James A. Schmitz'S Link Between Competition And Productivity

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  • Jeremy Greenwood
  • David Weiss

Abstract

James A. Schmitz documents, in a well‐known case study (Journal of Political Economy 113 (2005), 582–625), a dramatic rise in productivity in the American and Canadian iron‐ore industry following an increase in competition from Brazil. Prior to the increased competition, the industry was not competitive. Economic profits were divided between business and unions. Schmitz attributes the increase in productivity to a change in work practices in the industry, as old negotiated union work rules were abandoned or modified. This research formalizes a mechanism through which a rise in competition can lead to increased productivity in the iron‐ore industry.

Suggested Citation

  • Jeremy Greenwood & David Weiss, 2018. "Mining Surplus: Modeling James A. Schmitz'S Link Between Competition And Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 59(3), pages 1015-1034, August.
  • Handle: RePEc:wly:iecrev:v:59:y:2018:i:3:p:1015-1034
    DOI: 10.1111/iere.12295
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    2. Klaus Desmet & Avner Greif & Stephen L. Parente, 2020. "Spatial competition, innovation and institutions: the Industrial Revolution and the Great Divergence," Journal of Economic Growth, Springer, vol. 25(1), pages 1-35, March.

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    More about this item

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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