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

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  • James A. Schmitz
  • 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.

Suggested Citation

  • James A. Schmitz & Arilton Teixeira, 2004. "Privatization's impact on private productivity: the case of Brazilian iron ore," Staff Report 337, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmsr:337
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. Harold L. Cole & Lee E. Ohanian & Alvaro Riascos & James A. Schmitz, 2006. "Latin America in the rearview mirror," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sep.
    3. 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.
    4. Chang, Roberto & Hevia, Constantino & Loayza, Norman, 2018. "Privatization And Nationalization Cycles," Macroeconomic Dynamics, Cambridge University Press, vol. 22(02), pages 331-361, March.
    5. 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.
    6. 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.
    7. Kirill Borissov & Mikhail Pakhnin, 2018. "Economic growth and property rights on natural resources," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(2), pages 423-482, March.
    8. Pereira, Ricardo Antonio de Castro & Ferreira, Pedro Cavalcanti, 2006. "Impactos de Bem-estar da Privatização de Infra-estrutura," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 633, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    9. repec:sbe:breart:v:30:y:2010:i:1:a:2823 is not listed on IDEAS
    10. 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.
    11. Mark Aguiar & Gita Gopinath, 2007. "Emerging Market Business Cycles: The Cycle Is the Trend," Journal of Political Economy, University of Chicago Press, vol. 115, pages 69-102.
    12. 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.
    13. Suparna Chakraborty & Keisuke Otsu, 2012. "Deconstructing Growth - A Business Cycle Accounting Approach with application to BRICs," Studies in Economics 1212, School of Economics, University of Kent.
    14. Cakir Melek, Nida, 2014. "Productivity, nationalization, and the role of "news": lessons from the 1970s," Research Working Paper RWP 14-6, Federal Reserve Bank of Kansas City.
    15. Luiz de Mello, 2011. "Brazil’s Achievements and Challenges," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 12(1), pages 3-10, March.
    16. Arilton Teixeira & Benjamin Bridgman & Victor Gomes, 2005. "Sustainable Miracles," 2005 Meeting Papers 421, Society for Economic Dynamics.
    17. Kirill Borissov & Alexander Surkov, 2012. "Public versus Private Ownership of Exhaustible Resources in Models of Economic Growth with Heterogeneous Consumers," DEGIT Conference Papers c017_046, DEGIT, Dynamics, Economic Growth, and International Trade.
    18. 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 Schmidt- (ed.), Current Account and External Financing, edition 1, volume 12, chapter 9, pages 345-367 Central Bank of Chile.
    19. Reddy, Kotapati Srinivasa, 2015. "Why do Cross-border Merger/Acquisition Deals become Delayed, or Unsuccessful? – A Cross-Case Analysis in the Dynamic Industries," MPRA Paper 63940, University Library of Munich, Germany, revised 2015.

    More about this item

    Keywords

    Iron industry and trade ; Privatization ; Labor productivity;

    JEL classification:

    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L70 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - General

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