NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Mining Surplus: Modeling James A. Schmitz's Link Between Competition and Productivity

Jeremy Greenwood, David Weiss

NBER Working Paper No. 19556
Issued in October 2013
NBER Program(s):   EFG

James A. Schmitz (2005) documents, in a well-known case study, a dramatic rise in productivity in the U.S. and Canadian iron-ore industry following an increase in competition from Brazil. Prior to the increased competition, the industry was not competitive. Surplus in profits was 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.

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