Impact of Technological Change and Productivity on the Coal Market

The strong pace of improvement in coal industry labor productivity has been a major reason for the decline in coal minemouth prices that has taken place since 1979. The Annual Energy Outlook 2000 (AEO2000) forecast projects that labor productivity on a national basis will improve on average at a rate of 2.3 percent per year between 1998 and 2020, declining from an annual rate of 6.1 percent achieved over the 1988 to 1997 period. This paper examines the components of past gains in productivity, including regional shifts, the exit of less productive producers, and technological progress. Future prospects for continuing productivity gains at sustained, but lower, rates of improvement are discussed.