The Eitan Berglas School of Economics
Tel Aviv University
Ramat Aviv, Tel Aviv, 69978
Information about this author at RePEc
NBER Working Papers and Publications
|October 2013||Mining Surplus: Modeling James A. Schmitz's Link Between Competition and Productivity|
with Jeremy Greenwood: w19556
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.