Threats to Industry Survival and Labor Productivity: World Iron-Ore Markets in the 1980's

In the early 1980’s, the world steel market collapsed. Since the almost exclusive use of ironore is in steel production, many iron-ore mines had to be shut down. We divide the major iron-ore producing countries into groups based on the threat of closure faced by iron-ore mines in the respective country. In countries where mines faced no threat of closure, the iron-ore industry had little or no productivity gain over the decade. In countries where mines faced a large threat of closure, the industry typically had productivity gains ranging from 50 to 100 percent, gains that were unprecedented. We then argue that these productivity increases were not driven by new technology or by the closing of low productivity mines. Hence, the productivity gains were driven by continuing mines, using existing technology, increasing their productivity in order to stay in operation. ¤Jose E. Galdon Sanchez thanks the European Commission for a Marie Curie Research Fellowship and the Federal Reserve Bank of Minneapolis for its hospitality. The views expressed herein are those of the authors and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System.