Mining Surplus: Modeling James a. Schmitz's Link between Competition and Productivity

20 Pages Posted: 20 Aug 2018

See all articles by Jeremy Greenwood

Jeremy Greenwood

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

David Weiss

Tel Aviv University - Eitan Berglas School of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: August 2018

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

Greenwood, Jeremy and Weiss, David, Mining Surplus: Modeling James a. Schmitz's Link between Competition and Productivity (August 2018). International Economic Review, Vol. 59, Issue 3, pp. 1015-1034, 2018. Available at SSRN: https://ssrn.com/abstract=3233194 or http://dx.doi.org/10.1111/iere.12295

Jeremy Greenwood (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
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HOME PAGE: http://jeremygreenwood.net

National Bureau of Economic Research (NBER)

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David Weiss

Tel Aviv University - Eitan Berglas School of Economics ( email )

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel

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