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MINING SURPLUS: MODELING JAMES A. SCHMITZ'S LINK BETWEEN COMPETITION AND PRODUCTIVITY
Author(s) -
Greenwood Jeremy,
Weiss David
Publication year - 2018
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12295
Subject(s) - competition (biology) , productivity , economics , work (physics) , macroeconomics , engineering , mechanical engineering , ecology , biology
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.