Cyclical and Secular Determinants of Productivity in the Copper, Aluminum, Iron Ore, and Coal Industries
Over the past decade both labor and multifactor productivity have fallen in copper, iron ore, coal, and many other mining operations, causing production costs to rise. This decline, following years of rising productivity, has led many to conclude that new technology can no longer offset the adverse effects of resource depletion. As a result, real mineral commodity prices will be permanently higher in the future. This article questions this hypothesis. It first provides a conceptual analysis that shows that much or perhaps even all of the recent drop in productivity could be due to the unanticipated growth in market demand and the sharp jump in prices it provoked. It then surveys a number of the available empirical studies of productivity trends. For copper, iron ore, and coal, it finds substantial support for the view that much of the recent drop in productivity can be attributed to higher prices. Aluminum on the other hand did not experience the same jump in real price over the 2000s. Nor did it suffer a significant drop in productivity. These findings have important implications. In particular, they suggest that new technology may well continue to offset most or all of the cost-increasing effects of resource depletion. If so, real commodity prices will be lower over the long run than many now assume. This possibility has important consequences for mineral producing firms making large investments in future capacity, for mineral producing countries dependent on revenues from mining, and for society as a whole in terms of the long-run availability of non-renewable commodities and the future threat of mineral depletion.
|Date of creation:||Nov 2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (303) 273-3480
Fax: (303) 273-3416
Web page: http://econbus.mines.edu/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Chad Syverson, 2010.
"What Determines Productivity?,"
NBER Working Papers
15712, National Bureau of Economic Research, Inc.
- Joaquín Jara, J. & Pérez, Patricio & Villalobos, Pablo, 2010. "Good deposits are not enough: Mining labor productivity analysis in the copper industry in Chile and Peru 1992-2009," Resources Policy, Elsevier, vol. 35(4), pages 247-256, December.
- Chad Syverson, 2004.
"Market Structure and Productivity: A Concrete Example,"
Journal of Political Economy,
University of Chicago Press, vol. 112(6), pages 1181-1222, December.
- Chad Syverson, 2001. "Market Structure and Productivity: A Concrete Example," Working Papers 01-06, Center for Economic Studies, U.S. Census Bureau.
- Chad Syverson, 2004. "Market Structure and Productivity: A Concrete Example," NBER Working Papers 10501, National Bureau of Economic Research, Inc.
- Thomas J. Holmes & James A. Schmitz, Jr., 2010.
"Competition and productivity: a review of evidence,"
439, Federal Reserve Bank of Minneapolis.
- Thomas J. Holmes & James A. Schmitz, 2010. "Competition and Productivity: A Review of Evidence," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 619-642, 09.
- Ichniowski, Casey & Shaw, Kathryn & Prennushi, Giovanna, 1997. "The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines," American Economic Review, American Economic Association, vol. 87(3), pages 291-313, June.
- George Symeonidis, 2008. "The Effect of Competition on Wages and Productivity: Evidence from the United Kingdom," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 134-146, February.
- Dixon, Peter B & McDonald, Daina, 1992. "A Decomposition of Changes in Labour Productivity in Australia: 1970-71 to 1989-90," The Economic Record, The Economic Society of Australia, vol. 68(201), pages 105-17, June.
- Andrew Sharpe & Olivier Guibaud, 2005. "Indicators of Innovation in Canadian Natural Resource Industries," CSLS Research Reports 2005-03, Centre for the Study of Living Standards.
- Bellamy, Drew & Pravica, Luka, 2011. "Assessing the impact of driverless haul trucks in Australian surface mining," Resources Policy, Elsevier, vol. 36(2), pages 149-158, June.
- Robert E. Hall & Charles I. Jones, 1999.
"Why Do Some Countries Produce So Much More Output Per Worker Than Others?,"
The Quarterly Journal of Economics,
MIT Press, vol. 114(1), pages 83-116, February.
- Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
- José E. Galdón-Sánchez & James A. Schmitz Jr., 2002.
"Competitive Pressure and Labor Productivity: World Iron-Ore Markets in the 1980's,"
American Economic Review,
American Economic Association, vol. 92(4), pages 1222-1235, September.
- 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.
- 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.
- Edward C. Prescott, 1997.
"Needed: a theory of total factor productivity,"
242, Federal Reserve Bank of Minneapolis.
- Managi, Shunsuke & Opaluch, James J. & Jin, Di & Grigalunas, Thomas A., 2006. "Stochastic frontier analysis of total factor productivity in the offshore oil and gas industry," Ecological Economics, Elsevier, vol. 60(1), pages 204-215, November.
- Lasserre, P. & Ouellette, P., 1986.
"On Measuring and Comparing Total Factor Productivities in Extractive and Non Extractive Sectors,"
Cahiers de recherche
8625, Universite de Montreal, Departement de sciences economiques.
- Pierre Lasserre & Pierre Ouellette, 1988. "On Measuring and Comparing Total Factor Productivities in Extractive and Non-extractive Sectors," Canadian Journal of Economics, Canadian Economics Association, vol. 21(4), pages 826-34, November.
- Andrew Sharpe & Celeste Bradley, 2009. "A Detailed Analysis of the Productivity Performance of Mining in Canada," CSLS Research Reports 2009-07, Centre for the Study of Living Standards.
- Arilton Teixeira & James Schmitz, 2007. "Privatization’s Impact on Private Productivity: The Case of," 2007 Meeting Papers 798, Society for Economic Dynamics.
- 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.
- Aydin, Hamit & Tilton, John E., 2000. "Mineral endowment, labor productivity, and comparative advantage in mining," Resource and Energy Economics, Elsevier, vol. 22(4), pages 281-293, October.
- 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.
- Michele I. Naples, 1998. "Technical and Social Determinants of Productivity Growth in Bituminous Coal Mining, 1955-1980," Eastern Economic Journal, Eastern Economic Association, vol. 24(3), pages 325-342, Summer.
- Vernon Topp & Leo Soames & Dean Parham & Harry Bloch, 2008. "Productivity in the Mining Industry: Measurement and Interpretation," Staff Working Papers 0807, Productivity Commission, Government of Australia.
- Henry Ergas & Mark Wright, 1994. "Internationalisation, Firm Conduct and Productivity," RBA Annual Conference Volume, in: Philip Lowe & Jacqueline Dwyer (ed.), International Intergration of the Australian Economy Reserve Bank of Australia.
- Simon Zheng & Harry Bloch, 2014. "Australia’s mining productivity decline: implications for MFP measurement," Journal of Productivity Analysis, Springer, vol. 41(2), pages 201-212, April.
- Mun S. Ho & Wulong Gu, 2000. "A Comparison of Industrial Productivity Growth in Canada and the United States," American Economic Review, American Economic Association, vol. 90(2), pages 172-175, May.
- Jean-Francois Arsenault & Andrew Sharpe, 2008. "An Analysis of the Causes of Weak Labour Productivity Growth in Canada since 2000," International Productivity Monitor, Centre for the Study of Living Standards, vol. 16, pages 14-39, Spring.
- 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.
- Rodriguez, Xose Anton & Arias, Carlos, 2008. "The effects of resource depletion on coal mining productivity," Energy Economics, Elsevier, vol. 30(2), pages 397-408, March.
- Tilton, John E., 2001. "Labor productivity, costs, and mine survival during a recession," Resources Policy, Elsevier, vol. 27(2), pages 107-117, June.
- Andrew Sharpe & Celeste Bradley, 2009. "A Detailed Analysis of the Productivity Performance of Oil and Gas Extraction in Canada," CSLS Research Reports 2009-08, Centre for the Study of Living Standards.
- 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,"
286, Federal Reserve Bank of Minneapolis.
- 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," Journal of Political Economy, University of Chicago Press, vol. 113(3), pages 582-625, June.
- 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.
When requesting a correction, please mention this item's handle: RePEc:mns:wpaper:wp201311. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Edward Balistreri)
If references are entirely missing, you can add them using this form.